Croatia has come under increasing pressure by the European Union to let its bloated and heavily subsidised shipbuilding industry go bankrupt if it cannot be privatised successfully.

The government in Zagreb has been asked to commit itself in writing to
that position. Several member states have made it a precondition for
starting negotiations on competition policy in the EU membership talks
with Croatia.

Competition is one of three which have yet to be opened. In a letter
sent last week to EU competition commissioner Joaquim Almunia, Croatia’s
economy minister Duro Popijac said that after a second round of
privatisation “all options will be on the table, including a bankruptcy
procedure.”

According to WAZ.EUobserver’s sources in Brussels, the letter has been
circulated by the EU commission to member states. It is now up to them
to decide whether it is enough to open the chapter.

Shutting down loss-making shipyards and facing additional social unrest
in the coastal part of the country, where thousands stand to lose their
jobs, would be an extremely difficult decision for the Croatian
government to take. But it does not have much choice in the matter.

The EU message, according to one EU source, is clear: “We are not asking
Croatia do to anything more than we had to do ourselves. State aid of
this kind is illegal and cannot go on any longer. If you want to join
the EU you will have to comply with strict competition rules.”

Croatia has for years been postponing the painful measures needed to
restructure the shipbuilding sector and no government has mustered the
courage to solve the problem. But now Brussels and EU member states –
including the main supporters of Croatia’s membership such as Germany,
Poland, France and Italy – are refusing to make concessions on state
aid.

Last week Croatia was confronted with large-scale protests by farmers,
unhappy because the government failed to pay them the promised
subsidies. This was widely considered an example of what might happen if
the shipyards are forced into bankruptcy.

But several EU member states, including Poland, have undergone the same
processes and are unlikely to grant Croatia a blank cheque if it wants
to conclude accession talks as planned by the end of this year.

Source: EU Observer

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