Spain broke EU rules with scheme to support shipyards

Vigo, Spain
Image caption Shipyard workers have been protesting over the repayment of state aid

State support for Spain's ship building industry will have to be repaid following a ruling by the European Commission.

The scheme gave tax advantages to groups of investors that financed ship purchases.

The Commission says the scheme made shipyards more competitive by cutting the price of ships by up to 30%.

It has ruled the arrangement "unlawful" and said investors will have to pay back tax gains made from April 2007.

In a statement European Commission Vice-President Joaquin Almunia said: 'Economic interest groupings and their investors have benefited unlawfully from tax advantages which they must now repay to the Spanish state."

Workers in Spanish shipyards had been protesting ahead of the decision by the European Commission.

They fear the ruling will hurt Spanish shipyards and jobs will be lost.

Spanish Prime Minister Mariano Rajoy has been lobbying on behalf of the industry.

According to the Spanish newspaper El Pais he contacted European Commission President Jose Manuel Barroso on Monday to discuss the decision.

The European Commission stressed that the ruling does not affect an existing scheme which allows the government to give tax advantages directly to the ship building industry.

It also noted that Spanish shipyards benefit from aid designed to boost innovation, regions and exporters.

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