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Croatia may have to close yards

Croatia may have to close yards
One or more of Croatia's five ailing shipyards might have to close as part of European Union membership preparations, Economy Minister Damir Polancec admitted for the first time.

Croatia may have to close some shipyards

One or more of Croatia's five ailing shipyards might have to close as part of European Union membership preparations, Economy Minister Damir Polancec admitted for the first time.

"Unfortunately, one or some of the shipyards will have to convert into a different business, produce something completely different, not ships," Polancec, who is also deputy prime minister, told a parliament session broadcast live on state television. "But I promise there will be no layoffs," he added. Restructuring shipyards is one of the most sensitive social issues in Croatia's talks about joining the EU as the industry involves tens of thousands of employees and dependent businesses and there are fears of major lay-offs.

The shipyards submitted their restructuring plans to the government earlier this month. The plans are subject to approval from both Croatia's state competition watchdog and Brussels. The six docks have asked for some 1.2 billion euros ($1.9 billion) in state aid and up to seven years to meet EU standards. "We are analysing the individual plans but some of them do not prove long-term sustainability and that is a problem. We cannot prove that some shipyards can run a profitable business," Polancec said.

He said despite high state subsidies none of the docks -- which account for more the 15 percent of Croatia's total exports -- ended 2007 in profit. "It is a fact that has to worry us," he told legislators.

The shipyards have been weighed down by inadequate management, the rising price of steel and a weaker U.S. dollar.

Overhaul of shipbuilding is one of the key requirements from Brussels. Croatia needs to cut the subsidies which are much higher than those in the EU and amount to 400 million croatian kuna ($88 million) a year in cash, excluding state guarantees on loans.

The government wants to find private investors to modernise the shipyards while keeping shipbuilding as one of its key industries.

Once the European Commission approves the overhaul plans, Zagreb will start negotiating over competition policy, one of the most difficult policy areas in its EU membership talks.

Croatia hopes to wrap up the talks by October next year and join the bloc in 2010 or 2011.


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