SHIPBUILDING AID

Rajoy calls EC president over state aid to Spanish shipbuilders

PM seeks to persuade Brussels not to demand that all subsidies be returned

Madrid -

Spanish Prime Minister Mariano Rajoy on Monday called European Commission President José Manuel Durão Barroso in connection with demands by the EC for the financers of ships built by Spanish shipyards to return tax benefits they received, which Brussels has deemed to be a form of illegal state aid.

EC spokeswoman Pia Ahrenkilde confirmed to Europa Press that the telephone conversation that took place on Monday was at Rajoy’s request. She said the exchange focused on the Spanish shipyards but gave no further details.

EC vice president and European Union commissioner for competition, Spaniard Joaquín Almunia, last week maintained that the aid granted to shipping companies in Spain between 2005 and 2011 in the form of a so-called tax lease arrangement was illegal and investors must return it, but not the ship owners who commissioned the construction of the vessels or the shipyards themselves.

Industry Minister José Manuel Soria estimates that that value of the tax breaks provided by the financers of ships that were built between 2005 and 2011 is around two billion euros.

In a meeting last week, Soria argued that the tax lease system, under which financers temporary lease the vessels being built, had been in place since 2002 and that the Commission did not object to it at the time. He said the funds to be returned, therefore, should only date from those granted after the Commission focused on the system in 2011.

However, Almunia rejected those arguments, pointing to the fact that as the Commission ruled in 2006 that a French aid system, very similar to the one introduced in Spain, was incompatible with EC law, Spain should have "taken note" and stopped granting these tax benefits. The Commission is due to make a final decision on the aid on July 17.

Soria argued that if Spain is required to repay all of the aid it would severely damage the shipbuilding industry in Spain, putting at risk some 87,000 jobs.

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