Valletta - The European Commission is increasing pressure on the Maltese government to declare its ailing shipyards bankrupt and liquidate the state-owned company before continuing with the privatization process, The Times of Malta reported Thursday.

Commission sources told the newspaper: "Under normal circumstances, a company that is no longer viable and is registering losses - like Malta Shipyards is - should be declared bankrupt and put to liquidation."

However, the same sources said Brussels would not impose its views on the government as long as the privatization process would not involve further state aid.

The Maltese government said it intended to absorb about 100 million euros (142 million dollars) in losses that are expected to accumulate by the end of this year when a seven-year restructuring deal with the EU ends.

Despite a cash-injection of almost 1 billion euros pumped into Malta Shipyards, the company remains in the red.

Over 700 of the shipyards' 1,600 employees have opted for generous early retirement schemes offered by the government. EU Competition Commissioner Neelie Kroes in Malta last week triggered off panic among the workers, when she questioned the government's intention to cover the shipyards' debt.

Last Tuesday, hundreds of Polish dockers protested outside Kroes' Brussels office against a commission decision expected later this year on the restructuring of three Polish shipyards. (dpa)