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October 22, 2008

EC to Poland: Shipbuilding plan unacceptable

Addressing a plenary session of the European Parliament on October 21, Neelie Kroes, European Commissioner for Competition Policy, made it clear that there would be no approval for restructuring plan for Polish shipyards submitted to the Commission on September 12.

She told Parliament that the Polish yard state aid investigation in these cases has been pending for around four years. It relates to operating aid to the Szczecin, Gdynia and Gdansk shipyards. Subsidization has been on a scale that has seen each Gdynia worker, for example, subsidized by around € 24,000 a year--double the annual income of the average Polish worker.

In July of this year, the Commission came to the conclusion that the latest in a series of restructuring plans submitted by Poland did not ensure the viability of the shipyards, but offered two more months for new final plans to be presented by September 12.

Commission Kroes told Parliament she has now carefully assessed the restructuring plans submitted by the Polish authorities on September 12. "Unfortunately," she said, "I cannot see how to conclude that these revised final plans will ensure the viability of the yards. Indeed, the plans require even more public money to be pumped in the future, including day-to-day operating aid."

Though these latest restructuring foresee job reductions of approximately 40%, they give no "perspective of sustainable employment to the remaining workers, as the yards would very likely not become viable and would continue to need State support at the expense of the Polish taxpayers".

"This is not an acceptable outcome," said Commissioner Kroes. "It is not acceptable from the EU competition law perspective, but also not acceptable for the future of the shipyards, of their workers and, more generally, for the Polish economy. Therefore, as the situation currently stands, I do not see how to avoid the adoption of negative decisions on the Gdynia and Szczecin Shipyards."

But, she said, the Commission has been working actively to help the Polish authorities to come up with a solution that would ensure a viable commercial future for the economic centers of Gdansk, Gdynia and Szczecin and ensure sustainable jobs.

"According to this scenario," she explained, "the assets of the Gdynia and Szczecin shipyards would be sold on market terms (in several bundles) following an open, unconditional and non-discriminatory tender. The remaining shell company would use the proceeds from the sale of the assets to repay the aid received over the years and would be liquidated. The buyers of the assets would then be able to speedily resume economic activities at the shipyards' sites without the burden of having to repay the large quantities of state aid received by the yards over the years, and may reemploy even more people than would be the case if the September 12, restructuring plans were implemented."

"I can only assume," she continued, "that any investor willing to take on the yards with at least some of their current liabilities would be even happier to acquire the most important productive assets free of debts and develop them in competitive and sustainable way. The final outcome would probably be positive in two respects: on the one hand, the number of workers left without a job would be lower than foreseen in the restructuring plans submitted by the Polish authorities and, on the other hand, the workers reemployed by the purchasers of the yards' assets would have much more stable working perspectives within viable undertakings, because the burden of past debts would have been lifted."

This solution, called the "Olympic Airways solution", would allow a fresh restart of economic activity at the shipyards' sites and technical discussions on its possible implementation for the Gdynia and Szczecin shipyards are being held between the Polish authorities and Commission officials.

"As for Gdansk," said Commissioner Kroes, "I think that that there is a good chance to reach a positive outcome if there remains flexibility and good will on both sides. This is because (i) this yard has already been sold to a private operator which injected fresh money in it and (ii) the liabilities for past aid of this yard are more limited compared to the Gdynia and Szczecin Shipyards."

Commissioner Kroes said that the Commission has already told the Polish authorities that because the yard has received less aid in the past, it can be can be less demanding in in assessing the compensatory measures needed to comply with EC State aid rules. "The quid pro quo for this openness on the Commission part is that the Polish authorities must now submit a draft restructuring plan for Gdansk in order to permit any outstanding issue to be discussed. So far, we have not received such a plan and it is essential that the Polish authorities provide it quickly."

Moreover, the Polish Government can request support from the European Globalization Adjustment Fund (EGF), an application which is likely to be successful. The size of the intervention would depend on the amount of co-funding the Polish Government is ready to invest, as the EGF co-finances 50% of the costs at maximum. In the EGF cases analysed by the Commission to date the amount per person to be supported ranged between Ř500 (Lithuania –Textiles) and Ř10,000 (Italy-Textile) from the EGF, to which must be added an equal amount to be funded by the Member State.

"To conclude," said Commissioner Kroes, "I can say that the Commission has been very forthcoming in assessing these cases and has shown a considerable amount of flexibility. We have done everything we can and will continue to work with the Polish authorities to find an economically viable and socially sustainable solution which is in line with EC competition law and established Commission precedents. Now the ball is in the court of the Polish authorities. The future of the shipyards and of their workers depends on the Polish authorities' willingness to cooperate with the Commission to quickly find positive solutions in the framework I have just outlined."


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