Thursday, April 15, 2010

Greece Faces EU Court Over State Aid To Ship Builders

Long Running Dispute Continues as Brussels Runs Out of Patience
Shipping News Feature

EU – GREECE – After the report published by the European Union last August on the matter, the Competition Commissioner seems to have finally had enough of the prevarication surrounding what it believes was the unlawful granting of state aid to Hellenic Shipyards (HSY). Given the economic situation in the country generally and the inability of the company to return any of the money Mr Joaquin Almunia has determined that it is time to turn to the European Court of Justice.

Anyone desirous of reading the dozens of pages which detail the hundreds of communications, meetings and Council comments can reach the relevant documents via this link and following the “Publication on 27.08.09” (Yesterdays conclusions not being publicly available at the time of going to press having not been “cleansed of any confidential information).

A précis of the situation however is as follows.

The facilities of HSY are among the largest of the eastern Mediterranean. The yard is situated in Skaramanga, West of Athens, Attica. The yards were established in 1939 by the Hellenic Navy and purchased privately in 1957. The extended crisis in the shipping sector, which followed the first oil crisis, had a negative effect on HSY’s level of activity. In April 1985, the situation was so critical that the firm ceased operations and entered into the liquidation process. In September 1985, the State-owned bank ETVA bought the company and activities resumed after this.

Unfortunately the work undertaken at the yards proved insufficient to sustain the company considering the vast facilities and the large number of employees. In 1992, due to its financial obligations and accumulated losses, HSY was put into liquidation. In November 1993, following two unsuccessful efforts to sell HSY, the liquidation process was revoked. On the basis of the undertakings given by the Greek Government that its public yards would be privatised by 31 March 1993, in December 1992 the Commission had authorised a debt write-off in favour of HSY.

After the Greek Government failed in their obligation to privatise, the EU opened procedures against them for the misuse of state aid but this was later suspended when the Government claimed a sale was “imminent”. The situation continued with debts mounting and no sign of meaningful restructuring. Current debt to the EU is reported as €230 million. As the report states; “It has to be kept in mind that HSY had been put twice in liquidation during the preceding 12 years. In conclusion, this positive equity would not have sufficed to convince a bank to lend to HSY at a normal interest rate, i.e. at the interest rate charged when lending to healthy firms.”

It is this which is at the heart of the matter. Commissioner Almunia has been quoted as saying “We have had to bring a number of cases of this type in recent years, notably against France, Italy and Austria. We need to make sure that member states make their best efforts to recover the money”.

One wonders however, given the state of the Greek economy and the fact that the other EU countries are bailing out the country financially, will a successful prosecution merely result in a fine which in turn will be settled by the organisation that levied it?

Photo :- Hellenic Shipyards