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Business

Subsidy Dispute Poses Threat to Meyer Werft

A subsidies dispute between Germany and the EU is putting the future of the Meyer Werft shipyard in question after construction of a luxury liner was postponed in the wake of the September 11 terrorist attacks.

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It's doubtful whether Meyer Werft shipyard can survive without the state subsidy

A new dispute over subsidies between Germany and the European Union has placed a question mark over the future of the Meyer Werft shipyard.

EU Commissioner Mario Monti is planning to revoke its decision to approve subsidies for the construction of a luxury cruise liner at Meyer Werft because the delivery of the ship has been postponed, people close to the commissioner said Monday.

Royal Caribbean International (RCI), Meyer Werft's most important customer, requested that delivery be delayed after the cruise industry was hit hard by the economic fall-out of the Sept. 11 terrorist attacks. RCI's order is for the construction of the luxury cruise liner "Jewel of the Sea".

The German government paid a $28 million subsidy – around 7% of the total order volume of $400 million.

Under RCI's revised plans, the ship is to be launched in 2004, one year later than originally planned.

But under current EU rules, subsidies are only permitted for ships that are delivered before 31 December 2003. Exemptions are allowed only in cases were "external factors" hinder a construction program.

The German government has already applied for a special exemption in this case, arguing that the Sept. 11 attacks amounted to an external factor that could not have been foreseen at the time the order contract was signed.

The Commission is due to rule on the application by April 7. But people close to Monti told Handelsblatt that the Commissioner believes the terrorist attacks represent an interference for shipping companies but not for shipyards.

By choosing to impose a narrow interpretation on the EU rules, Monti was aiming to prevent a "new race for subsidies in the market for the construction of cruise ships", these people said.

Industry observers said that considering the current difficult situation in the shipbuilding market, it was doubtful whether Meyer Werft could survive without the $28 million subsidy. A spokesman for Meyer Werft declined to comment.

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