(Bloomberg) -- Switzerland’s government has been ordered by parliament to step in with aid to help the country’s ailing steel industry, in a break with its traditional hands-off approach to business.
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The sector is under increasing pressure as a slump in European manufacturing erodes demand from key customers, putting thousands of jobs at risk.
Lawmakers in the upper house on Monday voted in favor of cutting a levy steel firms pay to fund the country’s electricity networks. The government, and its economic advisory agency, had opposed any intervention, arguing that authorities shouldn’t decide who gets to be industrial winners or losers.
The controversy mounted after Swiss Steel Group, the country’s largest producer, said it would cut hundreds of jobs.
Stahl Gerlafingen, owned by Italy’s AFV Acciaierie Beltrame SpA, had announced earlier in the year that it was closing a production line. It then paused the move after the prospect of aid arose, putting pressure on lawmakers to respond.
Unia, the country’s largest trade union, said the parliament decision, which follows approval in the lower house last week, gives the companies “urgently needed time to set up their production sustainably without layoffs.”
Swiss Steel shares, which have lost about 97% of their value over the past decade, soared in early trading on Tuesday. They were up 37% as of 9:10 a.m. Zurich time, and have risen fourfold this month on the prospect of aid.
The demise of steel in Switzerland is part of a long-term trend seen across Europe, as the industry that was once a symbol of the continent’s industrial might groans under a flood of cheap Chinese steel and high energy prices. Germany’s Thyssenkrupp AG will cut 11,000 jobs at its steel unit by the end of the decade, it has said.
Debates about aid for the steel industry are also taking place in Germany, as well as the UK, but interventionist approaches aren’t part of the policy DNA in Switzerland.
The government has criticized sector-specific subsidies, as has SECO, the government agency in charge of the economy.
“As a matter of principle, Switzerland doesn’t pursue a vertical industrial policy that aims to promote specific industries, companies or technologies,” SECO said. “Authorities don’t know better how markets or technology will evolve, which is why selective subsidies risk expensive misallocations.”
In contrast to unions and lawmakers, the industry isn’t calling for direct subsidies, but would like help in areas like energy costs, arguing that competitiveness is suffering.