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Commissioner Kroes discusses Polish shipyard subsidies with Polish Prime Minister


European Commissioner for competition Neelie Kroes and Polish Prime Minister Jaroslaw Kaczynski met in Brussels on 18th April 2007 to discuss the current state of play as regards the European Commission's investigation into subsidies to the shipyards at Gdynia, Gdansk and Szczecin (see IP/05/644). Commissioner Kroes underlined that state aid, including the write-off of public debt, can only be approved as part of a package including restructuring plans to ensure restoration of long-term viability, a significant private sector contribution to the restructuring costs and capacity reductions to limit the distortions of competition created by the aid. The Prime Minister and Commissioner Kroes agreed that contacts on the issue between the Commission and the Polish authorities would continue with a view to reaching a satisfactory outcome as soon as possible. In particular, it was agreed that Commissioner Kroes would meet with the Polish Economic Affairs Minister Piotr Wozniak in Brussels within the next few weeks.
Commissioner Kroes underlined that the Commission understands the sensitivity of these cases as well as their complexity. In the view of Commissioner Kroes, the successful restructuring of the Polish yards is in the best interests of both the Polish authorities and the Commission.
Ms. Kroes is open to a constructive approach but "constructive" cannot mean "lenient" since state aid rules have to apply equally to every Member State.
The shipbuilding sector in the EU has in the past decades been subject of extensive and sometimes painful restructuring. The Commission has authorised state aid for this purpose only under stringent conditions. Poland can be no exception to this, she explained.
The restructuring plans submitted to the Commission in September 2006 do not fulfil any of the crucial criteria for allowing state aid, which are: restoration of viability, significant private contribution to finance the restructuring process and considerable capacity reductions.

Insufficient restructuring plans at this stage
There are in particular two steps which need to be taken urgently to move forward successfully the restructuring process. The first is to determine the necessary capacity reductions. This will enable to take the second step, which is to move forward the envisaged privatisation that will bring in the necessary new investment and restore commercial viability of the yards.

Capacity reductions
The guidelines on rescue and restructuring state aid require that aid must be accompanied by compensatory measures in order to avoid distortions of competition. In the case of the shipbuilding sector, these compensatory measures take the form of capacity reductions. This is a pressing issue, since potential investors want to know about such capacity cuts before deciding whether to invest.
Commissioner Kroes received a Polish proposal on the capacity cuts at the end of February. This proposal seems to be not sufficient. She invited the Polish authorities to reflect on further capacity reductions.

The second urgent issue is privatisation. Commissioner Kroes fully supports the decision of the Polish Government to privatise all three yards. This is important because:
first, the entry of a strategic private investor and the loss of control by the Polish State would demonstrate the belief of the market in the ability of the yards to return to viability  second, it would also provide the funds necessary for the financial restructuring and the indispensable modernisation of the yards.
Commissioner Kroes underlined that no strings should be attached to the sales – the buyers have to be free to determine the future commercial strategy for the three yards, free of political influence. And privatisation needs to lead to the loss of control by the state.
Commissioner Kroes is concerned about the timing of privatisation and further delays in the process.She underlined that mere promises of privatisation will not be sufficient, but that real progress is necessary. The yards have been surviving over years only due to repeated state support. This has been creating serious distortions of competition and calls now for urgent decisions.

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