NEW YORK -- The European Commission in Brussels said last week it was blocking part of a $26.8 million (160 million francs) subsidy from the French government for Allied Signal Corp.'s European arm, Allied Signal Fibers Europe SA.

The Commission said it would not approve a provision of $4.4 million (26.3 million francs) that would have been used for environmental clean-up activities for a new polyester filament plant being built at Meurthe-et-Moselle, in France. The EC said that portion of the subsidy did not conform with its laws governing aid for man-made fiber production.

According to a spokeswoman for the EC's office here, "financing a clean-up and de-pollution of a site doesn't constitute aid."

An Allied spokesman said Friday the company still plans on moving forward with the plant, which will be on line by mid-1996. It will have a yearly capacity of nearly 50 million pounds of polyester filament.

The rest of the subsidy was given an OK by the EC. The $22.4 million (133.7 million francs) will be used for upgrading and adding to production of high viscosity polyester staple at the same site. The upgrade will increase annual capacity from a little over 60 million pounds to about 100 million pounds.

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