European Commission adopts tough line on shipyard subsidies

The European Commission will not change its position over continuous state subsidies to keep shipyards across Europe afloat, Internal Market Commissioner Charlie McCreevy insisted when addressing the European Parliament over the future of the Gdansk shipyard in Poland.

EU investigations launched in June 2005 revealed that Polish shipyard had enjoyed state aid worth at least €1.3 billion (Lm565 million) since Poland joined the EU in 2004, something illegal under EU law. Since then, the European Commission and the Polish authorities have been locked in a struggle over the yard's exact restructuring plan.

The Commission wants to see two of the three docks at the Polish shipyard shut down in return for past state aid. It is also insisting that a significant contribution to the restructuring plan be made from own resources, including through the sale of assets that are not essential to the shipyard's survival or from external financing at market conditions. However, the Polish government insists it is only willing to cut one-third of production capacities.

Mr McCreevy told MEPs the restructuring of the Gdansk shipyard has been postponed for many years and public money has not been used to create viable jobs, but to keep alive a company that would under normal market conditions have ceased operations.

"Shipyards in other countries have had to considerably reduce their capacity and the Gdansk shipyard cannot be an exception," he insisted.

The end of shipyard subsidies is also looming for Malta Shipyards. The Commission has already made it clear it will not approve any more state subsidies to the Maltese 'yard beyond 2008, even if the seven-year restructuring plan fails.

Asked about the impact of such a stand on the future of Maltese shipyards, a spokesman for the Commission said that although the commissioner did not mention Malta, it is quite clear that the warning is being given to all shipyards in Europe.

"We will definitely stick to the agreed plans and no subsidies will be allowed to be given to any shipyard. This will also apply to Malta," he said.

During accession negotiations between Malta and the EU, an agreement was reached for a seven-year restructuring exercise aimed at putting Malta Shipyards on a sound financial footing by the end of next year.

According to the Accession Treaty, state aid would be allowed during the restructuring period. However, the treaty stipulates, "aid shall be granted once and no further aid shall be granted to the company after December 31, 2008".

Although progress has been registered in the financial performance of Malta Shipyards over the past years, it is still to be seen whether the company will be able to post a profit by the end of next year.

Despite a higher turnover, subsidies exceeded the anticipated sum by Lm600,000 and Lm1 million in 2005 and 2006.