Dispute over aid to Greek shipbuilder rumbles on

Date: 14/11/1996

By Chris Johnstone

COMPETITION officials are dampening Greek optimism that the long-drawn-out Hellenic Shipyards subsidy odyssey could come to an end within the next few weeks.

Greek officials say that a decision on the five-year-old case involving the country's biggest shipyard should be made before Christmas.

The outstanding issue is whether or not the European Commission will accept a doubling of the debt write-off from the original 1.3 billion ecu which accompanied an initial

- unsuccessful - attempt to privatise the yard in 1991-1992, said one Greek official.

Athens insists that the doubling of the subsidy stems from interest payments levied by banks and does not include any illegal aid.

However, officials within the Commission's Directorate-General for competition (DGIV) are playing down speculation of a quick and favourable decision for Greece.

They say the latest write-off looks suspiciously large and question Athens' right to augment the original 1991 figure.

They also suspect that Greece's apparent optimism about the case could be fuelled artificially to accompany the appointment of new management for the shipbuilder.

Hellenic Shipyards was given clearance to make use of a debt write-off clause even though the article in the EU Shipbuilding Directive which allowed for such a possibility disappeared in 1991.

“We expected the conditions to remain unchanged and not to be updated,” said a Commission official. “Greece's point of view is that the conditions for the 1991 write-off should not be frozen.”

Hellenic's new management has the task of diversifying the yard so that it can add commercial ship repair contracts to its core business of building naval warships.

The Greek government plans to keep a majority stake in the yard, but is going ahead with plans to sell off a 49&percent; stake to its 3,000 workers.

Athens has clashed frequently with the Commission over the case. In 1993, the Commission ordered that the yard be closed to all civil work after complaints that on-going subsidies were keeping it alive and damaging rivals.

The order was delayed as Greece attempted to find a buyer for the yard.

But a joint bid by Greek shipping company Peraticos and Germany's Howaldtswerke Deutsche Werft (HDW) was rejected as too low, and fresh sell-off attempts collapsed in 1995 when a bid by a consortium of Japanese, Norwegian, and Israeli firms failed to materialise.