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US STEEL KOŠICE AND CSÁKY SEEM FARTHER FROM AGREEMENT

Steel split worsens; no productive solution

AN AGREEMENT has yet to appear on the horizon between Slovakia and the European Commission (EC) over the problem of above-quota steel production by US Steel Košice (USSK).
Pál Csáky, deputy prime minister for European integration and the head of the EU entry negotiation team, said that the solution is now fully in the hands of USSK and the government is only waiting for the company's decision.

AN AGREEMENT has yet to appear on the horizon between Slovakia and the European Commission (EC) over the problem of above-quota steel production by US Steel Košice (USSK).

Pál Csáky, deputy prime minister for European integration and the head of the EU entry negotiation team, said that the solution is now fully in the hands of USSK and the government is only waiting for the company's decision.

"I am making an effort to reach an agreement between US Steel and the European Commission and to deter a lawsuit between the government and the European Union," stated the deputy prime minister.

"We cannot defend the interests of only one company in Slovakia at the expense of all citizens if we face a lawsuit. In case we lose, all taxpayers would have to pay more than in the case of compensations for USSK," he added.

The company, however, does not agree with Csáky's description of the situation.

USSK objects to Csáky's public discussion of the details of ongoing negotiations, something "a wise negotiator should not do", the company said.

"We are not aware of any instance in which this dispute would negatively impact any Slovak citizens other than our employees and their families. That being said, we shall continue to protect the interests and rights of our company and our employees," said Ján Bača, the spokesman of USSK to The Slovak Spectator.

In pre-entry talks, Slovakia had agreed on quotas for the production and export of steel to EU countries as well as financial aid provided to USSK in the form of a tax holiday until 2009.

Steel production by USSK should not grow faster than 3 percent annually compared with 2001, the quotas say. In 2001, USSK produced 4.05 million tonnes of steel. The year after, its production rose by 8 percent to 4.39 million tonnes, and in 2003 it should reach 5 million tonnes. The problem resulted from a misinterpretation of part of the accession treaty.

USSK President Christopher Navetta thinks that the Slovak government had initially pledged that all limitations concerning the growth of USSK steel production would become effective only after the country became a member of the EU, scheduled for May 1, 2004.

However, in May 2003, the government disclosed that problems might emerge concerning steel overproduction even before the country's accession. The EC claimed that the quotas should have been observed from the date the accession agreement was signed - April 2003.

Csáky also suggested that there might be a contradiction in two agreements signed by the Slovak government - one with USSK and the other with the EC.

"When we asked about the date specification, the people from the government ensured us that it was May 1 of this year," Navetta told the Hospodárske noviny daily.

He thinks that the Slovak officials were not well prepared for negotiations with the EC and cannot clearly present USSK's standpoint: "We have the impression that Slovak negotiators only wanted to get rid of the red mark obstructing integration as soon as possible."

If the problem is not solved by May 1, the date of accession, Slovakia could face protective measures on the part of the EC lasting up to three years.

The EU Commissioner responsible for competition policy, Mario Monti, recently said that EU help to Slovakia could be cut by €500 - 800 million in the mid-term period.

Brussels and the Slovak government initially agreed that the firm would partially limit its steel production, as it enjoys a 10-year tax holiday. USSK rejected a plan for compensation that would have seen it paying higher taxes than in its privatisation contract.

Last year, the company swallowed the largest portion of aggregate state aid, the news wire SITA reported. USSK is eligible for income tax relief up through the end of 2009. Aggregate aid must not exceed Sk21.22 billion (€516.25 million).

The Slovak government's condition for the aid is that the company maintain its labour force at 15,500 people, which lifts the company into the position of the biggest employer in the country.

The company accepted this commitment in the privatisation contract under which it acquired the core business of the ill-fated VSŽ steelmaker in 2000.

According to the privatisation treaty, USSK is also committed to a 10-year capital investment plan in Slovakia, which should result in expenditures of approximately $700 million (€575.23 million).

Between 2000 and 2002 the company invested $259 million (€212.84 million) and in 2003 the sum was $110 million (€90.4 million). This year, USSK plans to complete projects worth $160 million (€131.48 million).

"Next year we will be one year ahead of schedule in capital investments. We have more than fulfilled our commitments to the government, our employees, and our community, and we expect, and fully anticipate, that the Slovak government will do the same," said Bača.

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