EU adopts tough stance on Polish yards

The future of Poland?s shipyards was called into doubt yesterday in a stand-off between Brussels and Warsaw over hundreds of millions of euros of state aid. Neelie Kroes, EU competition commissioner, has given Warsaw until the end of the week to justify the state support by setting out restructuring plans to make the industry profitable. If Poland fails to map out a profitable future for the yards at Gdansk, Gdynia and Szczecin by Friday, Ms Kroes could deem the state aid lifeline illegal and order previous subsidies to be repaid.

The clash over Poland?s shipbuilding industry, the second largest in Europe after Germany?s, is likely to fuel tensions between the populist Law and Justice party government in Warsaw and the EU. Earlier this year Kroes criticised the Polish government for attempting to hold up the purchase of a Polish bank by UniCredit, the Italian banking group.

Jaroslaw and Lech Kaczynski, the twin brothers who are Poland?s prime minister and president respectively say they will put the interests of Poland first, and have raised hackles in Brussels with protectionism in the banking sector, a lukewarm approach to joining the Euro and a recent flirtation with restoring the country?s death penalty.

José Manuel Barroso, European Commission president, is expected tomorrow to urge Poland to play a constructive role in the EU when he holds talks with Jaroslaw Kaczynski in Brussels. The shipyard dispute is seen in the European Commission as a sign of Poland?s reluctance to play by the rules of the club it joined in May 2004.

Kroes first asked Warsaw for a justification of its state aid programme in June 2005. She believes that since Polish accession to the EU, some ?350m ($420m) have been paid to Gdynia and Gdansk and ?31m to Szczecin. She also is looking at export guarantees of $1bn for the first two yards and $634m for Szczecin. The industry directly employs about 16,000 people and indirectly about 80,000 more. Last year it built 28 ships and another 87 are on order.