Commission angry with government over Olympic

BRUSSELS – Attitudes to Olympic Airways (OA) in the competent departments of the European Commission were already highly unfavorable before last week’s announcement of an investigation into the loans which the carrier has repeatedly received in the past with government backing. The latest loan, granted by the Commercial Bank of Greece last week, was 19.5 million euros. The Commission nurtures serious doubts of its legality. But what is said to have angered Transport Commissioner Loyola de Palacio is the ruse used to make the loan possible; this follows the indignation caused by the Greek government’s almost complete disregard for the Commission’s demand in 1994 for the implementation of a rehabilitation program in the ailing airline. The Commission was due to officially initiate the procedure for probes into state support to OA on February 27. Once this was set in motion, any form of state financial support to the carrier would have been expressly forbidden. But Transport and Communications Minister Christos Verelis asked the Commissioner to postpone the decision for a week, citing – it is said in Brussels – the «bad political climate» in Athens which would be further aggravated by the decision. Always sensitive to such matters, the Commission endorsed the request, despite question marks regarding how the climate would improve within only a week. The miracle was achieved within 24 hours. On February 28, the Commission received an answer to its questions. With mixed feelings of surprise and anger – as senior officials put it – de Palacio got word that OA had received a loan from the Commercial Bank, guaranteed by the government. This was a loan that would have been politically – and legally – impossible to obtain if the Commission had announced its decision for a probe as planned on the previous day. The decision for an investigation was announced last Tuesday, March 6, and the Commission expressly stated that given «the company’s current financial situation, the granting of the loan was only possible because OA transferred its claims against the Greek state to public sector banks in order to obtain the loan.» «Therefore, it must be examined whether this measure amounts to an unwarranted adulteration of competition,» the Commission noted somewhat rhetorically (already certain of the answer) – in other words, whether the state had illegally subsidized the airline. Indeed, it was not simply an illegal subsidy, but «one that would allow the company to continue operating.» However, state guarantees are not the sole issue. The terms of the loan itself are such that they raise serious objections. Specifically, «the loan is granted for a year but there is an interest-free period of six months after disbursement. It must, therefore, be examined whether the loan amounts to a new illegal support.» Overall, the Commission has shown its anger over the complete failure of a financial rehabilitation program for the carrier, the correct implementation of which was an indispensable condition for the provision of any state economic support to OA. It says that the company received the loan and survives thanks to it, without having adhered to the 1998-2002 restructuring program, on the basis of which it is supposed to be still operating. The Commission also notes that it learned of the intention to grant the loan only at the last moment from press reports, without any official notification.