The European Commission has done a U-turn on its decision to refuse a slice of German state funding for a mill operated by Klausner Nordic Timber GmbH & Co KG.

The EC says it will reconsider its orginal assessment of funding for the Wismar sawmill because of allegations of “legal errors”.

Two aid packages granted by Germany in 1998 fell foul of the EC in January last year. The guarantee for a loan of €15.21m and an investment tax premium of €2m were ruled as being incompatible with the Common Market and Germany was ordered to recover the money.