The European Commission said on Monday that Greek government’s measures for the Hellenic Defence Systems S.A. (or Ellinika Amyntika Systimata A.E. – HDS), do not fall within the scope of EU State aid control because they protect the essential guarantees of Greece’s security.
However, Greece still has to recover and € 55 million of public support for “civil activities” of Greek Defense Systems, which hinder competitiveness in violation of EU State aid rules.
According to the EU executive’s in-depth investigation, during the period 2004-2011, Greece granted a number of support measures to HDS. These measures included a direct grant by the State of €10 million, a capital increase of €158 million and several State guarantees for loans of up to €942 million, but most of the aid to the HDS does not fall within the scope of the control of EU State aid because it served Greece’s national security interests.
Similarly, 55 million euros are excluded for civil activities, which constituted illegal state aid in violation of EU rules. Given that the HDS was a company in financial difficulties, these terms are set out in the 2004 EU Guidelines on State aid for rescuing and restructuring firms in difficulty.
In particular, it would require the member state to submit a credible restructuring plan to the bloc to restore the long-term viability of the company and to propose compensatory measures to mitigate the structural differences caused by the aid. If this does not happen, the Commission has come to the conclusion that these measures constitute unlawful State aid, which must now be recovered from Greece.
Hellenic Defense System SA (HDS) is a Greek company, which is almost entirely owned by the Greek State and still produces both defense-related products (eg infantry, ammunition, weapons, aircraft fuel tanks) as well as products of civil interest (eg small pistols, fireworks). In mid-2013, as part of the regular review of the EFSF’s past financial assistance program, Greece undertook to make an irrevocable decision on the future of the HDS, ending Greece to divide the previous EAS-HDS company into a defense-related company and a separate company for civil activities.