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State Aid, Industrial Restructuring and Privatization in the New German Länder: Competition Policy with Case Studies of the Shipbuilding and Synthetic Fibres Industries

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Author Info

  • Lars-Hendrik Röller
  • Christian von Hirschhausen

Abstract

The industrial restructuring in the new Länder of Germany consisted of closing down production capacities created under the socialist regime. In turn, public and private investments were channeled into those departments of the former "factories of the people" (VEBs) where new production capacities would be competitive on international markets. The Treuhandanstalt was the main agent of this process, providing both active management advice and enormous financial aids. As a result, this form of industrial policy in East Germany was in permanent conflict with the EC-competition rules, in particular articles 92 and 93 of the EEC-Treaty, which rules out state aid that distorts competition. This paper analyzes the effects of state aids in East Germany on European competition. We first discuss the specificity of post-socialist industrial restructuring in East Germany, which consisted of the "enterprization" of socialist combines into capitalist enterprises. Second, we review the economic rationale for state aids in the East German context by distinguishing between static and dynamic arguments. Third, we apply these theoretical arguments for state aid to two concrete case studies: shipbuilding and synthetic fibres. We conclude from a static point of view that state aids can not be justified in both cases: large capacities were added to already existing overcapacities in Europe. Considering dynamic arguments, we assess the likelihood that the industrial restructuring may lead to the creation of new East German enterprises that are at the leading edge of technology and with a high productivity. While the East German cases of state aid were a novelty for European competition policy, there might be important implications for other postsocialist countries (e.g. Poland, Hungary, Czech and Slovak Republic) once they join the EU. ZUSAMMENFASSUNG - (Staatliche Beihilfen, Industriereform und Privatisierung in den neuen Bundesländern -Untersuchung der Wettbewerbspolitik und Fallstudien des ostdeutschen Schiffbaus und der Synthesefaserindustrie) Der industrielle Umstrukturierungsprozeß in den neuen Bundesländern bestand darin, alte sozialistische Produktionskapazitäten abzubauen und Investitionen in diejenigen Betriebsteile früherer VEBs zu lenken, in denen wettbewerbsfähige marktwirtschaftliche Produktionskapazitäten aufgebaut werden konnten. Von staatlicher Seite kam der Treuhandanstalt die Aufgabe zu, neben aktivem Management auch umfangreiche finanzielle Mittel für die Umstrukturierung zur Verfügung zu stellen. Damit stand die Industriepolitik in den neuen Bundesländern in ständigem Konflikt mit dem wettbewerblichen Regelwerk der Europäischen Gemeinschaft, vor allem mit Artikeln 92 und 93 EWG-Vertrag, die staatliche Beihilfen generell untersagen. In diesem Beitrag untersuchen wir die wettbewerbspolitischen Auswirkungen der Industriereformen in den neuen Bundesländern. Eingangs wird die post-sozialistische Besonderheit dieses Prozesses erläutert, die in der "Unternehmisierung" sozialistischer VEBs in marktwirtschaftliche Unternehmen bestand. Im Anschluß daran werden statische und dynamische Kriterien zur Bewertung staatlicher Beihilfen entwickelt. Diese werden anhand von zwei Fallstudien getestet (Schiffbau und Synthesefasern). In beiden Fällen erscheinen die staatlichen Beihilfen aus statischer Sicht problematisch, da mit hohem finanziellem Aufwand neue Kapazitäten geschaffen wurden, die das Problem der europäischen Überkapazitäten noch verschärften. Bei dynamischer Sichtweise fällt das Ergebnis positiver aus, da die ostdeutschen Unternehmen bei erfolgreich abgeschlossener Umstrukturierung zu den europaweit produktivsten gehören könnten. Die Erfahrung in den neuen Bundesländern deutet auch darauf hin, daß bei einer EU-Erweiterung um mittel- und osteuropäische Länder erhebliche wettbewerbspolitische Probleme zu erwarten sind.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 96-13.

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Length: 51 pages
Date of creation: May 1996
Date of revision:
Handle: RePEc:wzb:wzebiv:fsiv96-13

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Keywords: Intermediation; Market Microstructure; Matching; Uncertainty; Innovation; Patent Licensing;

References

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  1. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  2. Damien NEVEN & Paul SEABRIGHT, 1995. "European Industrial Policy: The Airbus Case," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9509, Université de Lausanne, Faculté des HEC, DEEP.
  3. Christian von Hirschhausen, 1996. "Lessons from Five Years of Industrial Reform in Post-Socialist Central and Eastern Europe," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 65(1), pages 45-56.
  4. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
  5. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
  6. Portes, Richard, 1994. "Transformation Traps," Economic Journal, Royal Economic Society, vol. 104(426), pages 1178-89, September.
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Citations

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Cited by:
  1. Kathleen Toepel & Christian Weise, 2000. "Die Integration Ostdeutschlands in die Europäische Union: eine Erfolgsgeschichte?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 69(2), pages 178-193.
  2. Jens Hölscher & Nicole Nulsch & Johannes Stephan, 2010. "State Aid in the Enlarged European Union. An Overview," IWH Discussion Papers 24, Halle Institute for Economic Research.
  3. Jürgen Bitzer & Christian von Hirschhausen, 1997. "The Shipbuilding Industry in East and West: Industry Dynamics, Science and Technology Policies and Emerging Patterns of Cooperation," Discussion Papers of DIW Berlin 151, DIW Berlin, German Institute for Economic Research.

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