EU to defer Polish shipyard aid repayment

The European Commission will rule on Wednesday that Polish shipyards must repay more than 1 billion euros ($1.60 billion) of state aid to the government in Warsaw, but will delay execution for three months, a European Union source said on Tuesday.

The move responds to Prime Minister Donald Tusk's request for three more months to try to rescue the yards at Gdansk, Gdynia and Szczecin that were the cradle of the Solidarity free trade union that helped topple communist rule in 1989.

It is also an attempt by the EU executive to avoid blame for forcing the shipyards into bankruptcy. Brussels says successive Polish governments over the last five years have failed to keep their word or deal with the politically sensitive problem.

EU Competition Commissioner Neelie Kroes will put a decision to her 26 fellow commissioners on Wedneday but the source said it would not be applicable immediately.

"They will take a deferred decision on Wednesday looking to the autumn," the EU source told Reuters, speaking on condition of anonymity.

"The aid will have to be repaid unless they give us a restructuring plan that actually complies with the (EU) rules by then," the source said.

European Commission President Jose Manuel Barroso was due to discuss the decision with Tusk by telephone on Tuesday.

Analysts say bankrupting the shipyards would risk bolstering Euro-sceptic parties in EU newcomer Poland, laying the pro-EU government open to charges that it had failed to protect the heart of the anti-communist Solidarity union.

The shipyards employ about 15,000 people but Polish officials say that, taking into account suppliers and related sectors, as many as 60,000 jobs could be at risk.

Radoslaw Markowski of the Institute of Political Studies said a negative ruling by the Commission "could be a disaster for the government ... and also for the image of the European Union among Poles".