GERMANS SEEK TO BALANCE COAL SUBSIDIES, POLITICS

GERMANS SEEK TO BALANCE COAL SUBSIDIES, POLITICS

German lawmakers are searching for a way of reducing coal subsidies without the risk of a political backlash.

The country's very expensive subsidy program for German coking coal expires in 1995 and the government wants to find a way of reducing the level of aid

because of other demands on the public purse.Coal importers are keeping a close watch on the negotiations. But while they believe the market will be opened further for foreign coal, they do not expect a free market to be created.

"If we opened our coal industry to full competition, our industry would collapse," said Volker Jung, the energy policy speaker of the opposition Social Democratic Party (SPD). Mr. Jung wants to keep the hefty subsidy regime in place, believing domestic coal is needed for security reasons.

But Ernst Otto Kantelberg, a spokesman for the Association of German Coal Importers, said, "Subsidizing cokes coal to the tune of 10 billion deutsche marks ($6.3 billion) annually is a little bit much."

The sticky issue stems from a 1991 Bonn government promise to subsidize 50 million tons of domestic coal through 2005. The actual subsidies have been less, but because paying workers here is expensive and coal lies deep in the ground, the government still has to pay the DM220 ($137.50) a ton difference between domestic and imported coal.

German consumers, who pay some of the highest energy prices in Europe, help subsidize domestic coal through a surcharge on their bills. The tax amounts to 7.5 percent, but there are proposals to raise this to 8.5 percent after 1995.

But the extra levy may not be enough. Heinrich Seesing, the Christian Democratic Union (CDU) speaker on energy policy, said that, with the current financing, the deficit could reach as much as DM5.8 billion ($3.6 billion) by 1995. Although the amount to be subsidized from 1996 is set to drop to 35 million tons, the government is still strapped for cash because of the hefty cost of rebuilding east Germany.

Mr. Jung's party has put forward the idea of an overall energy tax to be used to finance domestic coal and to prevent environmental damage. The SPD wants the tax to raise DM20 billion ($12.5 billion) in revenue.

Business groups have decried the proposal. Some members of the CDU partly agree with the plan, but they want the new tax to cover only the DM6 billion ($3.8 billion) needed to pay for high-priced German coal. An idea from the conservative CDU is to pay subsidies up to a certain cash limit and gradually reduce this over the years.

But the SPD is opposed to that idea.

"It would be breaking a promise," Mr. Jung said. The conservative government tried to link the coal-subsidy issue to a discussion of nuclear power, but the SPD rejected this.

An obvious solution is simply to allow cheaper imports, but any mention of changing the agreement brings coal workers out onto the streets here. Although most other European nations, except for Spain, have reduced their coal subsidies, Germany remains politically unable to take this step.

The next round of discussions is set for Oct. 27. Mr. Jung is skeptical that a compromise can be reached.