SLOVAKIA has closed the EU legislative chapter on competition after eleventh-hour negotiations saw Spain withdraw objections at the very last moment.
The closure of the chapter was warmly welcomed by government and business leaders.
"The main feeling is relief and satisfaction, because after long, difficult and sensitive talks, we managed to reach agreement satisfying both sides, that is member countries and Slovakia - including investors," said Slovakia's chief negotiator with the EU, Ján Figeľ.
"I think the Spanish were persuaded by the openness, transparency and welcoming attitude of the communication process," he added.
The economic competition chapter is the last of 28 non-financial chapters to be completed before Slovakia is eligible to join the EU. Once passed, the legislative changes will force Slovakia to update its laws regarding tax benefits and other state subsidies used to attract foreign investment. Previously, the country had offered tax holidays as long as 10 years, a practice not allowed by EU rules.
Ahead of the EU summit in Brussels on October 25, Madrid finally agreed to a proposal that gives Slovakia two exemptions for state assistance to the companies US Steel Košice and Volkswagen Slovakia. Spain had objected to state aid given to VW Slovakia, claiming that it would lead to job losses at home. VW recently announced it would transfer significant production of the Seat Ibiza and the VW polo from Spanish plants to the company's Bratislava factory.
Spanish negotiators agreed to sign the joint statement on the chapter only 20 minutes before the official start of the EU summit. Under the terms of the proposal, VW will enjoy tax allowances representing 30 percent of its total investment until 2008, while US Steel Košice is allowed tax holidays until 2009, worth an estimated $500 million.
However, state aid will be withdrawn immediately if the two companies do not keep the conditions imposed by the European Commission. For example, annual growth of U.S. Steel's sales on European markets cannot exceed 2 per cent, the company must maintain the employment levels agreed in the purchase contract and it must improve environmental standards.
In addition, Slovakia must submit reports to the EC on both US Steel Košice and Volkwagen Slovakia every six months.
