EU Warns Poland on Shipyard Subsidies

BRUSSELS, Belgium (AP) - European Union regulators warned Monday that three Polish shipyards risk losing state subsidies unless the Polish government provides more information to prove that the aid is legal.

Polish authorities have until the end of August to send "satisfactory restructuring plans" for the Gdynia, Gdansk and Szczecin shipyards, said Jonathan Todd, an EU spokesman.

Without this information, regulators may determine that government and local support given to restructure the yards since 2002 contradict EU rules, Todd said. The rules prohibit governments from granting money to shore up businesses that would otherwise fail.

"The Commission doesn't gladly shut down shipyards," said Todd. "We would, of course, like to be able to approve this aid but in the present circumstances, we would be unable to do so."

The EU 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.

Todd said the Commission was still trying to determine the amount of government money at stake. Earlier estimates have put the state aid at euro593 million (US$731 million).

The EU 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.

It usually demands that businesses pay back illegal aid already granted. Money given before Poland joined the EU in May 2004 is exempted from the EU probe.

One of the shipyards, in Gdansk, is famous for the large strikes in 1980 that led to the formation of the Solidarity movement, which helped topple Communist rule in Poland.

A total of 12,000 people now work in the three shipyards.

Source:news.moneycentral.msn.com