Time stood still on the docks of 3.Maj shipyard as the champagne bottle swirled and smashed against the hull of a tanker being launched for Latvian owners.

As the giant vessel slid into the sea to music from a small brass band perched on a makeshift stage, the event was tinged with sadness. Croatia's five indebted shipyards face restructuring or closure before the country joins the EU in the next few years.

Unlike Asia, whose yards now control almost 85 per cent of the global market, the EU does not allow significant subsidies to relatively uncompetitive industries like shipbuilding.

The industry - which flourished under communism - has remained a bastion of resistance to structural reforms facing the southeast European state, whose economy is largely state-driven despite growth of nearly six per cent last year.

Croatian shipbuilding has around 1.5 per cent of the global market but is entirely dependent on state aid. It went downhill in the 1990s due to wars in former Yugoslavia, the loss of its traditional Russian market, and mismanagement.

Under pressure from the EU, each of its shipyards submitted restructuring plans to the government in April: They are a key requirement for Zagreb to keep on track its bid to wrap up accession talks in autumn next year.

Reinhard Lueken, secretary-general of the Community of European Shipyards' Associations, said it was clear that Croatian shipyards cannot conduct business any more with state aid.

"The good thing is Croatia has recognised that and wants to do something about it," he said. "But it's difficult to expect each shipyard individually to produce viable plans. Such a concept is wrong, in my view."

The restructuring plans, drafted separately by each shipyard last month, call for one last shot of state aid worth at least €1.2 billion and up to seven years to implement the overhaul. They must be approved by the state competition agency and the European Commission by July.

With unemployment in Croatia at more than 14 per cent - about double the rate in the eurozone - Prime Minister Ivo Sanader has said there would be no job losses, adding the docks have 49 new ships, worth $3.2 billion, on their order books.

But local media and analysts doubt the small Adriatic country can preserve all its shipyards.

"No EU country has escaped shipyard overhauls or closures. Croatia had better stop dreaming and start thinking about how to have one profitable shipyard, instead of five loss-makers," the leading daily newspaper Vecernji List said last month.

A top economic expert close to the government, asking not to be named because of the topic's political sensitivity, said every government since Croatia's independence in 1991 had failed to properly tackle shipbuilding - the main source of employment on the coast with 11,000 workers.

Ozren Matijasevic, who heads the national association of trade unions, said the docks would have to sell non-core business and specialise in more complex ships, after laying off some workers.