Editorial

When European Competition Commissioner Neelie Kroes shot down a government plan to write off the shipyards' accumulated debt of €100 million before the 'yards' privatisation, the immediate general reaction in the country was one of bewilderment and surprise at the EU's rigid stand over a matter that cries out for a solution. However, a careful reading of what the commissioner said at the end of her brief visit to the island may throw a different light on the issue. She said that "in principle, it (the writing off of the debt) is not acceptable" to the EU. In other words, it may become acceptable if the EU is ultimately satisfied that privatisation will lead to the 'yards' financial viability.

In fact, the commissioner did say she would give a definite answer when the government submitted a revised version of the business plan. Her stand would have to be considered in the light of the fact that, for a number of reasons, the shipyards failed to become profitable within the time limit agreed upon with the EU when the government launched a full-scale restructuring programme under which it could continue to subsidise the enterprise.

It is not the time to go into the reasons for the failure but it is safe to say that all parties involved, including the government, management and the trade union representing the workforce, share the blame for it.

The cold reality now is that the time is up and, after the expiry of the programme at the end of the year, the government would no longer be allowed under EU rules to continue subsidising the 'yards. In the face of this, the government had two options to resort to: privatisation or closure. Quite rightly, it chose the first but it felt that, in order to take this course, it had first to trim the workforce to a level that would make it attractive to potential investors. So, it launched the voluntary retirement schemes and set the ball rolling towards privatisation by issuing an international call for expressions of interest. The time for this closed yesterday.

Malta's shipyards are not the only ones that have been presenting problems to the EU. Poland has just submitted restructuring plans for its Baltic shipyards and, like Malta, Croatia was given seven years within which to overhaul its shipyards. Shipyards in Germany, Greece and Spain have had "illegal" subsidies, which have to be repaid. In Greece, for example, one shipyard was last July ordered to pay a €230 million subsidy back to the government on grounds that it did not meet EU conditions.

All this, and more, may explain why Ms Kroes might have sounded a bit harsh in her final comments. Still, the government is not deterred, with Finance Minster Tonio Fenech saying he is optimistic that agreement would be reached with the Commission to allow Malta to absorb the debt and, also, to push the deadline beyond the end of the year to enable the government to finalise privatisation.

It would seem that it all depends on whether or not the government manages to strike a privatisation deal that promises, to the satisfaction of the Commission, a very good chance of turning the 'yards into a profitable enterprise. Hopefully, a good plan and flexibility on the EU Commission's part will win the day.