EU, Croatia strike deal on restructure of shipyards

(BRUSSELS) - The European Commission struck a deal with Croatia Wednesday on the restructuring of its ailing shipyards, a reform sought by the EU as part of membership talks with Zagreb, a spokesman said.

"There were discussions today on the terms of the restructuring and the privatisation," said Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes.

"There is agreement on the overall capacity of the shipyards after restructuring," he added, confirming that the deal allowed the EU executive to successfully close the dossier.

The deal centres around the privatisation of the Uljanik shipyard, the only, out of a total of five, to remain profitable.

Under the deal, 50.1 percent will end up in private hands.

Also the Kraljevica yard will be allowed to expand under the terms of the agreement.

The Croatian government and trade unions agreed last December on controversial plans to restructure the shipyards. Since then the government has been in talks with the EU.

Shipbuilding accounts for around 15 percent of Croatia's exports while the five state-owned shipyards employ some 11,500 people.

Experts warn their production capacities, programmes and products have to be modernised, pointing notably to technological inferiority compared with global rivals, low productivity, overstaffing and outdated management.

The Croatian government hailed the deal.

"The sooner we start the privatisation the bigger the chance to preserve both the shipyards and jobs, since, unfortunately, negative trends in their business results are continuing," Deputy Prime Minister Damir Polancec told Croatian journalists in Brussels quoted by the state run HINA news agency.

The international tenders for the sale of the shipyards are expected to be called in early July, Polancec said.

"Offers that would envisage continuation of shipbuilding activities will have an advantage."

Polancec stressed it would pave the way for the opening of EU talks on competition policy, one of the toughest of 35 policy subjects that have to be completed before membership.

While Wednesday's announcement is good news for Croatia's EU prospects, neighbouring Slovenia is currently blocking progress over a border row between the two former Yugoslav republics.

Foreign ministers from both sides are due to meet with EU Enlargement Commissioner Olli Rehn on Thursday in search of a solution.

Croatia hopes to complete EU talks this year to become the bloc's 28th member in 2010 or 2011.