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COM (85) 376 
 
 
 
Vol. 1985/0 146 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the open ing to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom  27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMI SS IΟ  ΝίΟ F t THE· EUROPEAN COMMUNITIES
COM(85) 376 final 
Brussels, 19 July 1985
Eyk|S_QN_AID_AND_FINANCIAL_TRANSFERS_TO
V
»  THE STEEL INDUSTRY AFTER 1985
(Memorandum from the Commission to the Council)
io» :  le?
COM(85) 376 final

Rules on aid and financial transfers to the steel industry 
after 1985
(Memorandum from the Commission to the Council)
1. By the end of this year, the structural objectives which the 
Community adopted in 1980-81 when it introduced the steel aids 
code, and which were further specified at the meeting of 
Industry Ministers at Elsinore in late 1982, will have been 
achieved.
Supply and demand will, overall, have been brought back into 
the degree of balance the Community was aiming for by a 
reduction of over 30 million tonnes in capacity for hot-rolled 
products. As a result, the Community industry is expectec to 
be operating in 1986 at an average rate of around 70% of 
capacity; the rate will, it is true, be someway below this for 
most long products and for plate, but it will be considerably 
higher for wide and narrow strip and wire rod.
Conçurrent ly, wi  t  hthe help of public financ i  a lsupport,
unprecedent ed fo rany industry, on a varying butnever
unsubst  ant i  a l sc  a  le, Community steel firms w i  l  lhave been put
intoatechnical  and financial shape such th at ,unless the
ma r  k  etdet e r  i  orates, they should be viable; forseveral of
them,however. t  h  is  only applies provided th at they
consoli  d a  t  e  t  h ei  radjustment over the coming years, both with
f  u r  1  her  c  a  p a c  i ty reductions and with moderni z  a t  ion investment
In this c  onne c  t  ion it should be noted that the criteria the
C  o m m i  s  si  o nhas a  p plied in ass ess ing the vi ability prospects of
firms th  a  thave rec  e i  ved aid (and almost a ll Community firms
have done so to va rying degre es)  i  nc l  ude t heir ability to
provide f  0r  normal dep r  e  c  i  a ' t  i on of ptant. Consequently, there

*
is no justification for their investment to be aided in 
future.
2. The specia.1 circumstances which justified the authorization,
under the Community scheme based on Article 95 ECSC which
1expires on 31 December 1985 ,  of a series of types of aid 
which would otherwise have been incompatible with the common 
market under Article 4(c)ECSC therefore no longer obtain.
There will, it is true, still be overcapacity in the industry 
in 1986, for some product categories more than for others. 
However, firms should now be left to make at their own expense 
the adjustments in capacity their own competitive position 
requires, as firms in so many other industries faced with 
serious structural adjustment problems are having to do 
without having had the benefit of the Community solidarity 
shown to the steel industry.
The Community must ensure that this process is allowed to 
happen by a progressive, though rapid, restoration of market 
forces. For this purpose, it is necessary to provide a legal 
framework of substantive rules and enforcement procedures to 
prevent financial support by Member States from obstructing 
this process, and even jeopardizing the improvement in the 
balance between supply and demand already achieved.
The Council unanimously expressed its political support for 
such an approach when it agreed that all aid authorized under 
the aids code must be paid oy the end of 1985 and that no 
further aid should be authorized thereunder after that date.
3. In early Autumn, after consulting the Consultative 
Committee, the Commission will therefore seek, the Council's 
assent for a draft decision restricting severely the types of 
aid which Member States might be authorized from now on to 
give to their steel industries, whether under schemes 
specifically for the steel industry or under more general
iDecision 2320/81/ECSC

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schemes also covering other industries. The main features 
of the rules will be as follows :
(1) Aid to cover operating losses and all aid for investment, 
even under regional or general aid schemes and even where 
the investment does not lead to an increase in the firm's 
capacity, will be prohibited.
(2) Aid for research and development and for environmental 
protection wilt be permitted, after authorization by the 
Commission, on similar conditions and within similar 
limits as the Commission applies or proposes to apply to 
aid to industries coming under the EEC Treaty.
In view of the public interest aspect of such aid, to deny 
it to the steel industry would be an unjustified 
discrimination.
The con side rab leovercapa c  i  ty that will persi staf ter1985
appear  sto theComm ission tojustify the auth 0r  iza t  iono f
aid to enc  ouragetheclos u r  eof inefficient p lants th at
willh a vet  0beclosedsooneror later and pe nd in9 a
de c  i  si  o nt  0c  l  ose ma yin themeantime depress t  hemarke t
to t  he det  r  imento fthe  whole Community indus try#
Under this heading of closure aids the Commission should be 
able to authorize until 31 December 1988 aid for the following 
purposes:
to cover the actua l  costs (  redundancies, demolition and site
r  e c  l  a m a .  t ion, compe nsat ion f  0r  breach of contracts) directly
occasion ed by the c  losure o fcomplete rolling plants and
plants s upporting them w it  hintermediate products, which are
actually in produc t  i  on on ' 1January 1986 and whose closure

had not been provided for under Decisions 2320/81 or 
1018/85/ECSC.
- to;provide firms c  losing such plants with compensation not 
exceeding their value as determined by an independent valuer 
on the basis of the residual value of the plant itself 
and/or the discounted value of its return, in which the two 
limiting cases would be:
- plants which are fully depreciated but which still
.  2generate a gross margin ,  and where they would be closed 
only in return for an incentive covering the value of%
their future return;
- more modern plants which still have high depreciation 
costs to cover but are operating at a loss, and where the 
closure incentive could not exceed the residual 
depreciation costs.
The Commission considers that closure aids cannot be 
permitted under any circumstances to distort conditions 
of competition in the market place. To this end, the 
Commission intends to apply strict means of control.
Such compensation would be refundable if the firm subsequently 
increased its capacity in the same sector or in other ECSC 
activities without authorization or was found to be breaching 
Community rules on prices.
Any transfers of public funds involving an aid element that 
could not be justified under one of the above three headings 
(aid for reseach and development, environmental protection or 
closures) will be prohibited.
A. The enforcement of strict and exclusive rules on aid to the 
steel industry after 1985 also requires scrupulous vetting of 
Member States' provisions of equity capital to steel firms, 
especially where they are already publicly owned.
difference between selling price of output and variable costs

- 5 -
The draft decision will therefore provide that all such 
provisions of capital, like cases of proposed aid of the types 
referred to above, must be notified to the Commission before 
the operation takes place. The Commission will determine 
whether the operation involves an aid element. The criteria 
it will apply for this purpose will be closely modelled on 
those explained to the Member States in its statement on 
"Public authorities' holdings in company capital".^
Briefly, this will mean that any provision of capital (or 
comparable financial transfer) by governments that is carried 
out in circumstances such that the State cannot expect a  
re'turn on its investment comparable to that a private investor 
would require to undertake the same type of operation will be 
regarded as including an aid element.
5. The Commission invites the Council:-
- to confirm its agreement that strict Community discipline on 
aid to the steel industry will apply from 1  January 1986;
- to approve the guidelines set out in the Commission's 
communication (COM(85)376) on rules on aid and financial 
transfers to the steel industry after 1985;
- to note the intention of the Commission to prepare on the 
basis of these guidelines a proposal, on which the Council 
undertakes to give its assent, pursuant to Article 95 of the 
ECSC Treaty, in time for the Commission to adopt its 
decision before 31 December 1985.
Cf letter ref. $G(84) D/11839 of 17 September 1984.