EU receives Polish shipyard restructuring plans

The Polish government has now provided the EU with details of government subsidies for shipyards after a warning that failure to do so could force the EU to demand the yards repay the funds.

“The commission will now need several weeks to analyze the restructuring plans to assess whether they would ensure the shipyards’ durable economic viability,” a spokesman for the European Union said. Poland missed the 31 August deadline to provide more information to prove that the aid to restructure the Gdynia, Gdansk and Szczecin shipyards since 2002 was legal and had then promised to send it on 2 September.

The EU is currently investigating whether government and local support given to restructure the Gdynia, Gdansk and Szczecin shipyards since 2002 break EU rules. The issue is highly charged because thousands of jobs could be lost if the yards were forced to close.

The European Commission said it wants to make sure that state subsidies would not be used to keep the shipyards afloat artificially but could approve a rescue plan to restore them to commercial viability. In its statement, the commission said the aid would only be legal under EU rules, “if used to restructure the yards so that they can survive in a competitive market without further subsidies in the future.” The commission was still trying to determine the amount of government money at stake which earlier estimates have put at ?593 million ($731 million). On top of that, close to ?1.5 billion had been given to the three companies in export guarantees, Brussels claimed.

The EU executive must check that state subsidies do not give companies an unfair advantage over rivals. It can allow state aid in certain circumstances ? such as a one-off cash injection to turn around a troubled firm ? but it does not allow governments to pay a firm’s running costs.

Warsaw claims the shipyards are an icon of anti-Communist struggle and such status demands special treatment. The Polish stance is therefore one of moral, nostalgic, perhaps political nature as opposed to the economic principles quoted by the EC. After all, the shipyards are considered a living symbol of former anti-Communist resistance, Gdansk being the cradle of Solidarity.

The reservations coming from Brussels might be strengthened by intuitive anxiety that after the shipyards, Poland could be using the same justification for state assistance to its coal mining industry and then other sectors under the guise of political nostalgia.

The Polish government and Brussels will most likely have to find a compromise, a way of dealing with the shipyard which would allow it to develop and grow, produce ships and to make a profit. For the time being the ball is in the Brussels court and will remain there for several weeks, at least.

If the EC does decide that the support given to the three yards runs counter to the accepted EU standards and practice, this could mean certain bankruptcy for the shipbuilders.