Shipyard subsidies must stop by 2008 - EU

The European Commission yesterday reiterated its position over subsidies to Malta Shipyards and made it clear there is no way it will approve further state aid after 2008, bar those permissible under existing EU rules.

The Commission was reacting to comments made a few days ago by the Leader of the Opposition, Alfred Sant, who said that "a Labour government would continue to subsidise the shipyards beyond 2008 through European Union funds if the need arose".

Asked to comment about Dr Sant's remarks, the spokesman for competition affairs at the European Commission told The Times the accession treaty provides that Malta Shipyards are allowed to receive operating and restructuring aid until the end of 2008. He specified that the maximum assistance that can be granted until that date is precisely determined and, furthermore, the 'yards have to be restructured in order to become economically viable by the end of that period.

"This provision of the accession agreement is an exceptional derogation to the state aid rules. Indeed, these forbid operating aid as well as restructuring aid granted on a continuous basis. This derogation was granted as the 'yards were, and still are, heavily loss-making and an immediate ban of the subsidies would have led to their bankruptcy. Accordingly, no further operating or restructuring aid will be allowed beyond 2008. Therefore, the company must become viable before that date."

Asked whether EU funds can be used to subsidise Malta Shipyards, the Commission spokesman said the only direct aid, and not from EU coffers, Malta Shipyards will be entitled to after 2008 is the same as that given to similar entities under the existing EU rules. These could cover various minor initiatives such as research and development aid, training and environment.

"The Commission will of course verify that this sort of assistance does not constitute hidden operating or restructuring aid," the spokesman specified.

During accession negotiations, Malta obtained a five-year transition period within which to phase out state subsidies to the shipyards. Lengthy negotiations between the government, the shipyards management and the unions led to a restructuring plan aiming at making the shipyards viable by 2008.

Part of the agreement involved the reduction of the workforce by 1,000 workers and the writing-off of Lm300 million in accumulated debt.