AS EARLY as late February, the European Commission had advised the government that it may have to take back the €20 million it wanted to give to ailing Cyprus Airways, local media reports said yesterday.
Moreover, politicians appear to have been kept in the dark about the Commission’s warning to the Finance Ministry when they gave the nod to the €20 million on March 3.
According to Politis, on 28 February the European Commission Directorate General (DG) for Competition informed Finance Minister Charilaos Stavrakis that any state aid must have the prior approval of the Commission.
The letter cites Article 108 of the TFEU (Treaty on the Functioning of the European Union) concerning state aids. Among other things, it notes the “suspensory effect” of the article.
It notes that any state aid must not be applied before the Commission endorses, or is considered to have endorsed, a decision approving such aid. And it goes on to advise that any state aid given before the Commission’s approval may have to be recovered from the beneficiaries [Cyprus Airways].
Article 108 of the TFEU states: “The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market… it shall without delay initiate the procedure provided for in paragraph 2.”
Paragraph 2 of the same article notes: “If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market…or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.”
The upshot of the DG’s letter to Stavrakis, Politis said, is that the government did not obtain the green light from the Commission before granting the €20 million to Cyprus Airways. More than that, it also suggests that the government did not even notify the Commission of its plans. The paper speculated it was likely the Commission would now initiate an investigation into the matter.
As the dates show, Stavrakis received the letter four days before parliament voted through the €20 million at his insistence. It would appear the Finance Minister did not inform the House of Representatives of the Commission’s letter to him.
Stavrakis declined comment when contacted by the Mail yesterday.
The €20 million cash injection was approved on 3 March by the parliament at the urging of Stavrakis, who warned politicians that otherwise the airline would go bankrupt with devastating effects on the national economy.
In response to a query, the DG press office sent the Mail the following statement:
“The Commission is in close contact with the national authorities in Cyprus – no decision has been taken so far.”
The money to CY was given as compensation for losses incurred by the airline due to prohibition of use of Turkey’s airspace.
It is not the first time questions have been raised over the government’s assistance to airlines. Deputies who last year approved a €35 million rescue package for now-defunct Eurocypria later complained that the Finance Ministry had withheld critical information from them. Most of the amount was used to pay off bank debts.
In 2006 CY sold Eurocypria to the state but on condition that the national carrier would receive no further assistance.
