Government has nowhere left to hide on saving our steel
We haven’t seen the story make its way into the British media yet, but Italian media reported on Friday that the European Commission had issued ‘letters of comfort’ to the Italian government making it clear that state aid to the struggling Ilva steelworks in Taranto in Southern Italy would not have to be paid back in the event of a successful sale. It may not sound like earth-shattering news, but it takes away the last excuse of the British Government for not acting to Save our Steel.
There is an argument that governments cannot intervene to help their domestic steel industries because of Brussels state aid rules. And it’s certainly true that those rules prevent the sort of blatant interference in the market that the Chinese government (just to pluck a country out of the air) practices – that’s why China doesn’t meet the criteria for being granted Market Economy Status under WTO rules. But the rules are more flexible than some people maintain, and the Ilva case is a perfect example.
The Italian government provided Ilva with funds to clean itself up, making it easier to meet emissions targets, and become a more sustainable steel producer. That sounds to me like a good example of state intervention to address market failures, rather than a subsidy for poor business performance. And now it seems that the European Commission agrees, although they did investigate the subsidy.
So, the British government can no longer claim – as it has in the past – that European Union rules prohibit assisting the British steel industry. It isn’t the EU stopping the British government intervening, it’s their own blinkered free market ideology.
And an old town on the arch of the heel of Italy has a letter from Brussels to prove it!