Germany, EU Nearing Agreement on Eco-Tax

The German government's efforts to protect its big energy-consuming industries from high ecological taxes may be about to pay off.

The leader of the European Union's directorate for competition policy, Alexander Schaub, said that negotiations with Germany have come down to fine tuning, the Frankfurter Allgemeine Zeitung reported Monday.

An agreement could be reached by early 2002.

Germany may be able to expect some leeway from the European Union, Schaub said, if the government in Berlin agrees to enforce sanctions against companies that violate standards of energy-saving and pollution.

Negotiations on the matter have accelerated lately, as the two parties seek a compromise before Germany’s present exemption runs out in March 2002.

Under current conditions, German industries such as mining, chemicals and steel have an 80 per cent exemption from the so-called "eco-tax".

Were they to lose this privilege, nation-wide corporate taxes would shoot up by about €2.5 billion per year, according to the business newspaper Handelsblatt.

Despite pressure to conform with European Union standards, German Finance Minister Hans Eichel has requested a 10-year extension on the exemption.

The request was denied by the European commissioner for competition policy, Mario Monti, the same man now trying to forge a compromise with Eichel.

Monti has said he is concerned that the exemption gives German industries an unfair advantage in Europe, where high ecological taxes are seen as a key to reducing pollution.

The government of Chancellor Gerhard Schröder, which includes ministers from the environmentalist Green Party, is pressured from outside by conflicting forces. On one side stands the EU, enforcing standards on fair competition, and on the other side stand major industries whose support Schröder covets running up to the 2002 parliamentary elections.