Cyprus' national airline has stopped operations after the EU Commission decided that illegal state aid of €65 million must be paid back.
The EU Commission claimed that the Cypriot government had breached rules on support for national companies as it had been underwriting losses between 2007 and 2013.
The Cypriot government owns 93% of Cyprus Airways and has been searching for outside investors.
Finance Minister Harris Georgiades said today that alternative arrangements will be made for passengers booked on Cyprus Airways flights as from Saturday, commenting that "the company has ceased being a viable entity, and cannot continue to operate."
The EU Commission investigated the company’s funding as the Cypriot government continued to shovel money at the national carrier year after year despite a tough austerity programme fo the remainder of the economy.
Rescue plans for the airline were criticised as being based on unrealistic assumptions which failed to address the airline's problems and anyway were taking longer to implement than Euro rules allowed.
Governments in the Eurozone can give one off help to a struggling company, once every ten years if need be. For state owned enterprises this stops governments supporting loss makers at the expense of competition.
"Cyprus Airways received large quantities of public money since 2007 but was unable to restructure and become viable without continued state support. Injecting additional public money would only have prolonged the struggle without achieving a turn-around," EU Competition Commissioner Margrethe Vestager said in a statement.
Comments
If not outright Government subsidies then this amount must be borrowed on the open market. So there must be guarantees for this money under-written by the Portuguese State.... Or are the Portuguese banks in on the scam and not asking for security ?
As often discussed, and shown well with Portugal Telecom 'lending' nearly a billion euros to Rioforte - yet another example of UNWRITTEN LAWS in Portugal taking priority over the WRITTEN LAWS! Without making any kind of due diligence checks of the safety of the companies money.
It totally defeats the purpose of the EU issuing Fair Trade regulations.
And now we hear that it is no use Portugal applying for this new European Central Bank economic stimulus support money as the government bonds it would offer in exchange to ECB are rated as JUNK.
The ECB only mandated to buy strong bonds.