Brussels rules out subsidies after 2008

The European Commission has made it clear that it will not approve any more state subsidies for Malta Shipyards beyond 2008, even if the current seven-year restructuring plan fails.

Asked to state whether the granting of more government aid to Malta Shipyards will be permitted if the company is still in the red by the end of the current restructuring programme, a European Commission spokesman told The Times that "this will be impossible".

The spokesman explained that the period during which Malta can give subsidies to its shipyards - seven years until the end of 2008 - is very long by Commission standards.

"Normally, companies in difficulties have to return to financial viability within three to four years," he said.

The question of shipyard subsidies was raised again recently during a dispute between the GWU and the government over disciplinary action taken against a number of workers. Irked by a stoppage, Investments Minister had said that taxpayers were fed up of paying for the shipyards, which had received Lm300 million in subsidies till 2003 and another Lm113 million for restructuring. Despite the EU deadline, the MLP has said in the past that if need be, it will continue to pump taxpayer money into the company even beyond 2008. In 2005, Labour leader Alfred Sant insisted that if the MLP were elected to government it would continue to subsidise the shipyards.

According to the spokesman, during Malta's accession negotiations the then EU member states had accepted this protracted period and authorised sizeable aid amounts because the starting situation of the 'yards, which later became Malta Shipyards, was very difficult.

He said that yearly losses were often a multiple of the turnover and the 'yards were artificially kept alive thanks to important and repeated aid. He insisted that this was, however, a "one time, last time" concession.

"Given this exceptional treatment - which meant Malta Shipyards benefiting from a protracted restructuring period and important aid amounts - no further aid can be authorised after 2008. The Accession Treaty itself indicates that 'the aid shall be granted once...no further aid shall be granted to the company after December 31, 2008'."

An analysis of the projected amount of subsidies laid down in the official Shipyards Restructuring Programme approved by the then shipyards task force in December 2001 and the actual subsidies given so far, based on data supplied to The Times by the Ministry for Investment, Industry and IT, shows that following a good start, the programme is going off track.

Figures show that until the end of 2004, the subsidies actually given were lower than those projected in the restructuring plan. However, in 2005 and in 2006, the subsidies amounted to Lm0.6 and Lm1 million higher than anticipated.

More worrying is the fact that in those two years, although turnover was much higher than projected suggesting that losses should have decreased further, the contrary happened.

Sources close to the European Commission told The Times that this data clearly indicates that although still in time, returning Malta Shipyards to the black in less than two years' time is a very challenging task.

The Commission spokesman said that following 2008 it will not even be possible for Malta Shipyards to be granted aid to enter into different activities if it is still not in a positive financial position.

According to EU rules, aid can be granted to help the company undertake additional activities compared to those normally undertaken in the shipyards' day-to-day business. These can include regional investment aid, training aid, research and development aid and environmental protection aid. These types of aid support very specific projects and can only cover a part of the related expense.

The Commission spokesman, however, stated that "companies in difficulty cannot benefit from this kind of aid. If Malta Shipyards does not first return to financial viability these aids will automatically be prohibited".