The European Commission has authorised the land of Saxony in Germany to pay €40 million in aid to the dairy group Alois Muller.

The funding is part of a large scale investment project that is hoped to support the innovative processing methods, technologies and is expected to help reduce environmental pollution in the company.

The state aid will be implemented until December 2004 at the company, and is part of the European Union's (EU) guideline for State aid in the agriculture sector. The funding for the dairy company is part of the single highest amount approved by the Commission in the last 3 years. Saxony plans to provide €176 million in aid for companies, and this may have implications for other dairy companies.

The aid takes the form of direct grants and will be finalised by the Free State of Saxony on the basis of the Investment Grant Law. The land of Saxony has also applied for aid within the framework of a Structural Funds Regulation, which would be partly financed by the EU.

The application for EU money under the Structural Funds has not yet been approved. EU funding will not exceed €88 million, which is 50 per cent of Saxony's total planned costs.