Dow Chemical intends to pump billions of euros into economically-depressed eastern Germany, according to press reports published on Friday.

The Frankfurter Allgemeine Zeitung wrote that the American company, which already has four sites in the eastern states of Saxony and Saxony-Anhalt, is planning to invest around €2 billion ($2.4 billion) in new and existing plants by 2012.

The paper reported that Dow would likely apply for subsidies from the European Union as well as the German and state governments. Italy's Manuli Stretch and Belgium's RP-Compounds are already expanding their capacities at the Dow "ValuePark" in the city of Schkopau in anticipation of the expansion.

Largest investment in the east

Dow's investment could put up to €1.8 billion into developing the plastics industry in Saxony-Anhalt, creating jobs for as many as 1,000 people in a region that suffers from high unemployment.

The former East German communist state left a decrepit industrial landscape in its wake, where most factories were outdated. In the almost 13 years since unification the industrial capacity of the east still lags dramatically behind the west -- a fact reflected in the disproportionately high jobless rate. At least 1.627 million people are jobless in the region with an unemployment rate of 18.6 percent.

Eastern Germany still has no real industrial base and investments from industry have been few and far between since German unification in 1990. BMW's pledge to spend €1.2 million to build a new plant in Leipzig -- pegged to start operations in 2004 -- has been the biggest in the region to date. Volkswagen and Siemens announced in January they would build a new plant near Chemnitz in Saxony, which would require an investment of up to €500 million and create around 600 new jobs.

Foundations laid

Dow has already invested more than €2.7 billion in sites in eastern Germany since 1995 and it employs 2,300 people in the region.

The company reportedly plans to increase its capacity to produce polyethylene, polypropylene and polystyrene in Schkopau, where its subsidiary Buna Sow Leuna Olefinverbund (BSL) has just laid the foundation for a plant that will make PET plastics that are used for bottles and packaging. The plant is slated to open late in 2004 for a total cost of €100 million.