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Germany brokers agree to end coal mining subsidies by 2018

The German government brokered an agreement to end subsidies to coal miners by 2018, clearing the way for RAG AG, the country's last coal-mining company, to sell shares this year.

A previous round of talks broke down on February 1 after Juergen Ruettgers, prime minister of North Rhine-Westphalia, Germany's main mining region, insisted on halting the subsidies in 2014. „North Rhine-Westphalia will pay subsidies only until 2014, which will save the state some €468 million ($609 million) compared to subsidizing until 2018,” Ruettgers told reporters in Berlin late today after negotiations among federal and state ministers, industry executives and labor union representatives. The federal government will pay for the four remaining years. The compromise was vital to Essen, Germany-based RAG's plans to split off its mining unit and concentrate on its profitable activities such as real estate, chemistry and power generation.

RAG previously said the breakdown of the talks put the company's future „in danger.” „Today's compromise gives German miners job security as no mine worker will be fired,” Economy Minister Michael Glos told reporters. A total of 34,000 miners work at RAG's coal-mining unit Deutsche Steinkohle AG in eight mines and one coking plant, producing 24.7 million tons of coal in 2005, according to DSK's Web site. In 1980, Germany had 187,000 miners. Under the agreement, mining costs that remain after the closing of the pits will primarily be paid out of a fund which will be filled with the proceeds of RAG's IPO. If the fund falls short, the states of North Rhine-Westphalia and Saarland, a smaller mining area, will guarantee two-thirds of the costs, the federal government one-third. (Bloomberg)