EU Warns Czech, Polish Steel Sectors on Aid

The European Commission warned Wednesday that it could order failing Czech and Polish steel companies to pay back government subsidies if they don't become viable businesses by December 2006.

The Czech Republic and Poland have a temporary exemption from strict European Union rules on funding restructuring efforts in the industry. The Commission said delays in the restructuring process meant some firms "may fail to achieve viability" by the end of next year, despite growing demand and higher prices for steel. Cost-cutting efforts need to continue, it said.

Some steel firms in both countries are still underperforming, despite exceptionally favorable conditions on the steel market, the EU head office said.

Most Czech and Polish steel companies benefited from export growth and increased domestic sales in 2004. Demand in the EU for finished steel products increased by 7 percent in 2004.