By Simon Zekaria - 11th May 2004
European regulators have demanded that Madrid reimburse €308.3 million in illegal aid subsidies given to state-backed IZAR shipyards.
IZAR, owner of all public shipyards owned in Spain, was granted the bail-out sums by state holding company Sociedad Estatal de Participationes Industriales (SEPI) to the tune of €500 million between 1999 and 2000.
The monies arrived in the form of a capital injection, loans and a purchase price above the market value.
IZAR has already paid back part of the loans – bringing the reduced reimbursement figure.
“The Commission is aware that the consequences of this decision may be serious for IZAR, its shipyards and its employees,” said the EU executive on Tuesday.
“However, the Commission has received numerous complaints from shipyards in other EU Member States, and even from Spanish competitors,” added the body.
The move from Brussels comes despite continuing long-running competitiveness problems in the EU shipbuilding sector due to “unfair practice of Korean shipyards”.
The European Commission accuses South Korea of pricing ships below manufacture cost and ‘dumping’ them on EU territory, so driving European firms out of the market.
Having tried and failed to reach an amicable settlement with the country over illegal shipbuilding subsidies on three separate occasions between November 2002 and May 2003, the EU started legal proceedings at the World Trade Organisation.
The market share for European shipbuilding has dropped 15 per cent since 1999, with the Korean slice reaching 38 per cent in 2003.
In March, European ministers also renewed EU laws establishing temporary aid to boost ailing shipbuilding in Europe for another year - extending until 31 March 2005.
The terms of the proposal from June 2003 outline the so-called ‘temporary defensive mechanism', set down by Brussels in the wake of its issues with Soeul.
Under the law, EU regulators allow member states to offer aid payments, normally seen to contravene strict EU competition policy, to their shipyards involved in constructing tankers carrying gas, chemicals and containers.
The EU sets a 6 per cent total threshold for aid of total contract sums in a bid to balance need for subsides and excessive sector-based competitive advantages.
And temporary aid measures are only one part of a twin Brussels attack to revamp European shipyards.
In November 2003, EU competition authorities authorised national governments to double research aid spent on ailing European shipyards – as one part of a 30-stage project from January this year to boost EU shipbuilding by 2015.
Under the terms of the paper Brussels gave EU member states the green light to subsidise 20 per cent of future innovation projects on “state of the art” ships – a jump of 10 per cent on current rules.
Brussels sees the measures as softening restrictive state aid rules to galvanise research funds in the industry.
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