Rexrodt Predicts De-Escalation in VW Case

08/29/96

Reuters reported that, on Tuesday, German economics minister Guenter Rexrodt said he sees signs that tensions between Volkswagen and the European Commission are easing.

The tensions result from a dispute over subsidies that the German state of Saxony offered Volkswagen to set up shop there, in June. The European Commission approved only 540 million marks ($365.5 million) of a proposed 780 million marks in subsidies. Saxony premier Kurt Biedenkopf decided to hand over all the money anyway, because he said 23,000 jobs depended on it. The European Commission discussed sanctions against the parties, and EU Competition Commissioner Karel Van Miert suggested that the subsidies be paid in escrow until the matter is settled. Saxony premier Kurt Biedenkopf rejected the proposal and Saxony filed a complaint in Luxembourg last Friday.

German Chancellor Helmut Kohl's cabinet discussed whether to file a complaint with the European Court of Justice in Luxembourg in the case, but reached no decision at its regular meeting on Tuesday, said Rexrodt.

Rexrodt said fresh discussions at all levels will take place over the next few days, but that the German government will continue to prepare a possible complaint, which Bonn would have to file with the EU by September 16.

Brussels indicated earlier this week it was also preparing to file a complaint. Rexrodt said he hoped such an impasse could be avoided.

Rexrodt said Bonn and Brussels needed negotiate an interpretation of the Treaty of Rome's Article 92, which says that subsidies are acceptable in regions affected by the former separation of Germany.

Paul Dever -- The Auto Channel