Croatian PM rejects bids in docks sale

ZAGREB - Reuters

Croatian PM Zoran Milanovic arrives at the EU headquarters in Brussels. AFP photo

The Croatian government rejected bids for three loss-making, state-owned shipyards yesterday and pledged to find a solution by July for a key issue it needs to resolve before joining the European Union next year.

Bankruptcy proceedings will be started at one of the smallest, heavily indebted shipyards, Social Democratic Prime Minister Zoran Milanovic told a cabinet session.

Shipbuilding had been a flagship export sector in former Yugoslavia but went downhill after Croatia became independent in 1991. Four of its five shipyards are loss-makers kept afloat by hefty state subsidies that are contrary to EU competition rules.

Unless Zagreb sells the docks or makes them viable on their own by the time it joins the bloc on July 1, 2013, it will have to pay back some 2 billion euros ($2.64 billion) of subsidies. “Croatia’s shipbuilding will survive, as a profitable industry playing by different rules and with a somewhat smaller output,” he said.

Restructuring of the docks is a sensitive social issue because the industry employs about 10,000 people and supports many small businesses as contractors. Croatia’s unemployment has reached a nine-year high of almost 20 percent after three years of recession and stagnation.