The EU executive yesterday decided to extend its rules allowing member states to provide aid to their shipyards by a further three years, until the end of 2011.
However, this type of state aid is not the same as the one provided by the Maltese government as it is only limited to specific objectives such as innovation, development and export credits.
The Commission, which oversees the EU's state aid rules to ensure a level playing field for business within the 27 member states, said it wanted more time to study how aid to boost innovation was being used.
"EU shipyards need to innovate and the innovation aid rules in the framework on state aid for shipbuilding were designed to foster such innovation," European Competition Commissioner Neelie Kroes said.
"I am pleased to see that so far these rules are increasingly applied, although we need further experience with their application before drawing conclusions on whether specific sectoral rules are still necessary," she said.
The Commission is studying proposals from Poland for a restructuring of three Polish shipyards - including those in Gdansk where the democracy movement Solidarity was born - which could allow them to avoid having to repay large amounts of state aid.
Malta will also need the permission of the EU in order to incur more than €100 million in debts accumulated by the Malta Shipyards during the application of a seven-year restructuring programme. This will have to be done before the finalisation of the current privatisation process.
Sources close to the Commission told The Times that, in theory, a member state cannot decide to cover any debts of a commercial company as this means direct operational state aid, something which is not permitted under EU competition rules.
However, the Prime Minister said on Wednesday that his government will soon start discussions with the Commission in order to try to solve this issue and obtain an exception to the rule.
Over the past seven years the government subsidised Malta Shipyards to the tune of €950 million as part of a one-time restructuring programme agreed between Malta and the EU before accession and aimed to give the opportunity to Malta Shipyards to become commercially viable.
The government has admitted this exercise failed.