EU Commissioner objects to plan

European Competition Commissioner Neelie Kroes said yesterday the government's intention to write off about €100 million in debts before selling Malta Shipyards violated EU rules but she was willing to see a revised business plan before taking a definite stand.

Finance Minister Tonio Fenech said later he was confident that the European Commission would eventually come round to accepting what the government had in mind in relation to the shipyards' privatisation process.

Speaking just before she returned to Brussels after a one-day visit, Ms Kroes said the government's plan to write off the yard's remaining debt before selling it off runs against EU rules.

"In principle it is not acceptable", she said, pointing out that EU rules forbid state subvention and the case of Malta Shipyards does not fulfil any of the exceptions contemplated.

She did say, however, she wanted to see a revised version of the shipyards' business plan before giving a definitive answer.

But her statement about what the rules say was stressed repeatedly throughout her brief session with the press.

The government had been clever to negotiate a derogation before it joined the EU, allowing it to continue subsidising the yards till the end of this year but the time is now up, she said. "It's five to twelve".

The commissioner also discussed a series of pending issues on competition law but the main focus of the exchange was on the yards' privatisation. It seems that the government was not able to convince the commissioner, known by the victims of her anti-trust crusades as Steely Neelie, to grant a last concession on the matter as it had hoped. The rationale has been to provide the new operator with a clean balance sheet.

Brussels raised the alarm months back and suggested the politically-unsavoury alternative of liquidating the shipyards but the government refused, primarily because this would mean laying off whatever workforce is still on the yards' books.

The commissioner even shot down the idea, suggested by the Finance Minister a few months back, that the deadline beyond December 31 could be pushed back by a few months.

"Come the end of the year, it's over," she insisted.

When asked for his reaction, Mr Fenech insisted that he remains optimistic both on the chances of obtaining permission to absorb the outstanding debt and also to push the deal beyond the end of the year.

If the government is not allowed to write off the debt it could jeopardise the privatisation process and have serious consequences for everyone, he insisted.

The commission is adamant that no subvention is given to the yards' prospective buyers, he said, adding that, once the business plan of the successful bidders is presented to the commission an "agreement will be found".

He even stood by his statement that the EU is likely to accept a delay, beyond December 31. "We explained that it would not be ideal for the privatisation process to be hastened. Again, I'm sure that when the commission sees that there is a bona fide transaction going on, it will not jeopardise everything for a few weeks," he said.

The closing date for the submission of expressions of interest is September 15. A selection process will then follow and the bidders will have until November to make their detailed offers. Only after that, Mr Fenech said, will the government be able to go back to the commission to negotiate the matter.

"Even in the recent dispute between the government and the General Workers' Union, when both sides made quite tough statements, we still found a compromise and I believe the same will happen this time," he said.

When pressed last June about the timing of the government's decision to go for privatisation, which was announced in mid-June, Mr Fenech had explained that the cogs had actually started moving late last year but "evidently", he added, "I think nobody would have expected us to start the privatisation process in December or January with an electoral campaign due, so now is the opportune moment".