EU gives Germans milk money

Large-scale investment in Germany's milk sector looks set to be given the go ahead. The payment of €40 million to the dairy group Alois Müller has been approved under EU state aid rules.

The aid will be used to finance investment in processing and marketing of milk and milk products in Leppersdorf, Saxony. The main objectives of this large-scale investment project are the support of innovative processing methods and technologies, the promotion and development of new and improved products and the reduction of environmental pollution. The EU says that the project will be implemented until December 2004.

The state aid, in the form of direct grants, will be financed by the Free State of Saxony on the basis of the country's Investment Grant Law (Investitionszulagengesetz), an aid scheme that has already been approved by the Commission.

However, to be in accordance with the European Union (EU) guidelines for state aid in the agriculture sector, aids for investments with eligible expenses in excess of €25 million must be specifically notified and approved by the Commission.

The total eligible costs of the investment project comprise around € 176 million. Hence, this is the biggest individual investment project the Commission has approved under state aid rules in the agriculture sector within the last 3 years.

For this project, the Land of Saxony has also applied for aid within the framework of the Structural Funds Regulation No 1260/1999, which is partly financed by the EU. Since the investments will be carried out in an objective 1-region, the total aid amount (public expenditure financed by the EU and by the Member State) may not exceed €88 million, which is 50 per cent of the total eligible cost. The application for EU money under the structural funds, however, has not been approved yet.