The future was looking so bright for Greece’s Piraeus cluster at the beginning of July. Xu Lirong, chairman of China Cosco Shipping, having clinched a deal to takeover Greece’s largest port, pledged the Chinese company would invest some $896m in upgrading the port, with priority being given to reviving the country’s shipyard sector and upgrading cruise terminal infrastructure.
But a week can be a long time. Indeed, long enough for a couple of large spanners to be thrown into the works.
At the beginning of July, China’s Cosco Shipping appeared ready to invest some $900m in upgrading the port with the shipyard and cruise sectors a top priority.
First week of July Xu said the Hong Kong-listed company planned not only to make Piraeus the biggest commercial port in the Med and one of Europe’s most important, but also to re-establish it as the ship repair point in the eastern Med, and develop it as a leading European cruise hub.
However, the mid-July attempted army coup in Turkey and confirmation a week later of European Commission’s determination to bring Athens to heel over claims Greece broke EU state aid rules with regards to aid to Hellenic Shipyards, the country’s largest facility, have seen local optimism stirred by the final privatisation of Piraeus port, turn to pessimism.
The commission has taken Greece to the European Court of Justice for failing to recover more than EUR250m ($275m) in what it considers illegal state aid to Hellenic. The EC is also asking the EU’s highest court, to impose a one-off fine of $6.72m on the Greek state, with further penalties of $39,170 per day. The penalty covers from the day of its judgement in 2012 until the date Greece complies. In 2008, Brussels found some loans, guarantees and capital injections granted to the shipyard between 1996 and 2002 when it was in dire straits failed to meet EU state aid rules.
“After its adoption, Greece still has not implemented the commission decision of June 2008, ordering the recovery of over EUR250m of unlawful state aid to Hellenic Shipyards,” the commission said in a July 22 statement.
The shipyard was privatised in 2002 and became part of German steel group ThyssenKrupp, which sold it to Abu Dhabi MAR in 2010 at the worst of the Greek debt crisis.
The EC move comes as interest in re-energising Greece’s floundering shipyard sector grows. The EC move was not unexpected, but it had been hoped a more lenient approach would be adopted.
The Sname Greek Sector and the Hellenic Shortsea Shipping Association are among those leading the call to revive the sector, pointing to its huge potential as a booster of the Greek economy. However, both also point out the state aid issue is a noose ‘around the neck’ and both acknowledge Greece is not in a position to pay the amounts being sought.
There has been talk for over two years about Cosco ships, and even Chinese navy vessels, being repaired in Greece. Greek equipment manufacturers and logistic companies have also been talking of Cosco’s, and China’s, growing interest in Greek shipyards.
Indeed. Cosco has spoken of building a drydock capable of repairing the largest ships in its fleet linking Asia with Europe.
The failed army coup and the subsequent declaration of martial law has caste a very black cloud over the future of the Eastern Mediterranean as a cruise destination, Cosco had aired plans to invest hundreds of millions to turn Piraeus into a major European cruise hub.
Indeed, the events of the past weeks have been unsettling for all players.
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