Wednesday, September 26, 2007

AP: EU Investigates Romanian Debt Write Off

BRUSSELS, Belgium — European Union regulators said Wednesday they would investigate if the Romanian government should have written off about $37 million owed by a local steel company now controlled by Mittal Steel Co. NV.

The European Commission said it doubted the legality of the Romanian decision to waive and reschedule debts before the state-owned pipe and tube maker Petrotub was privatized and sold to Mittal in 2003.

If its probe finds that the money is effectively an illegal state subsidy, the EU can order that the company, now called Mittal Steel Roman, pay back the 26 million euros.

Regulators said they would check if the privatization was economically more advantageous for the government than seeing the company collapse _ as Romania argues.

But they said the state should not be counted as a single creditor and Romania would have to prove the economic benefits of privatization for each state agency.

The EU executive also questions Romania's liquidation costs.

The investigation is unusual because state subsidies granted before a country joined the European Union are normally exempt from strict state aid rules.

EU governments are not allowed to fund businesses unless they can justify it using a narrow set of terms, showing that the money will not give the company an unfair advantage over others.

Romania became part of the EU on Jan. 1, 2007.

However, the EU said the steel sector had special rules that allowed it look into this case.

Mittal Steel Co. bought up a string of steel plants in the former Eastern bloc earlier this decade.

It is now the world's largest steel maker, with some 10 percent of global output, as it completes its takeover of Arcelor SA.

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