Originally, Mr Monti had planned to order a 75% reduction in public subsidies for projects requiring investments of more than 100 million euros. However, this met with strong criticism from EU member states, with Germany most vehemently opposed to the proposal, and as a result, the Commissioner is said to be reconsidering.

In his statement of opposition last week, Chancellor Gerhard Schroeder argued that there should be no changes made to the current regulations when they are reviewed in 2002. However, Finance Minister Hans Eichel is thought to have deviated from the party line in talks with Mr Monti, hinting that the German government would accept a reduction in tax assistance to industrial projects of up to 50% for all projects requiring investments of more than 50 million euros, provided the process is staggered.

However, officials from all of the country's major automobile producers- one of the sectors which is likely to be most affected by any changes to subsidy levels- have stated their firm opposition to any reductions, and have written to the European Commission, threatening to favour non-EU countries for any future investment projects.