Discussions with the European Commission over a €100 million accumulated loss made by Malta Shipyards until the end of 2008 will now be avoided since the government has accepted to do what Brussels had suggested two years ago and liquidate the company.
In a surprise announcement a few weeks ago, Finance Minister Tonio Fenech had announced that the government had decided to wind-up the company and liquidate it in order to give the new owners, Italian company Palumbo the possibility of starting with a clean sleet.
The government's decision contrasts sharply with the original position it took over the whole privatisation process in 2008 as despite Brussels' insistence that the government should not absorb any of the debts accumulated by the shipyards at the end of the seven-year restructuring programme, the government had insisted to the contrary on the premise that it wanted to introduce changes with "a social conscience".
However, two years down the line it seems that the government has come to the same conclusion as Brussels that the best way forward is declaring the company bankrupt and liquidate its assets.
A government spokesman yesterday said that the liquidation of the shipyards will mean that the government will not be responsible any longer for any debts it could have made until its closure. However, he said that it is not yet known how much debtors and creditors the company had until it closed its doors last Wednesday.
"The government has no intention to absorb any of the accumulated debts the company might have. It will pay its debtors through its own funds as part of the liquidation process and from the money owned to it by creditors," the spokesman said.
According to the government, since the end of the restructuring process in 2008, no further taxpayers' money was given to the Shipyards.
The situation before 2008 was very different as despite the millions of euros pumped by the government over the seven-year restructuring programme, agreed with the European Commission prior to Malta joining the EU, Malta Shipyards still manage to accumulate €100 million in losses and which the government had said that it intended to cover.
"We have always said that liquidation in this process is the best way forward and we are satisfied with the government announcement to do so," a Commission official told this newspaper.
Originally, Malta and Brussels were at loggerheads on the privatisation process of the shipyards as according to EU state aid rules the government could not absorb the losses of a functioning company while privatising it. However, the government had insisted on more talks with the Commission on order try to solve the issue without resorting to liquidation.
"Liquidation was the most logical thing to do and we note that this will now be happening," the Commission official said. "It took a long time but at least both Malta and the Commission has now arrived at the same conclusion," he said.
According to a multi-million euro restructuring plan agreed between Malta and the EU during accession negotiations, the shipyards had to be given substantial support to restructure and turn the company from a loss making entity to a profitable one. However, despite some progress made, particularly during the first years of the restructuring programme, the company has still remained in the red by the end of 2008.
During the seven-year restructuring programme between 2002 and 2008 the government invested €825 million amounting to €5,800 per Maltese family. €700 million in debts accumulated over the years have been written-off and €124.4 million were provided to the company in operating aid, training grants and capital subsidies. Despite this massive financial injection, Malta Shipyards continued to register losses.
According to EU laws it was not possible to continue subsidising the shipyards after 2008 as this was deemed illegal. Thus the process had to be started to either sell or liquidate the company.
Malta will now not have to sustain any longer an ailing company.