The European Commission has launched an investigation into the Polish government's transfer of zł.202 million to state-owned national carrier Lot Polish Airlines, daily Gazeta Wyborcza writes.

European Union regulations stipulate that governments should not distort competition on the market by giving unregulated sums of money to state-owned companies. The commission says that it could in theory agree on state support for Lot, but only if negotiations were held and a plan drawn-up for the company's restructuring and privatization, Wyborcza reports.

The Polish treasury, which holds a 93 percent stake in the carrier, claims that it acted in accordance with the law. However, Wyborcza suggests that the treasury made the transaction in secret, informing neither taxpayers nor the European Commission. The newspaper has therefore questioned the transaction's legality.

The Treasury reportedly gave the zł.202 million via a third party, called Lot Services. This mini-subsidiary, set-up by Lot Cargo, issued a large number of shares. The treasury minister then bought the stock for zł.202 million, using money from a fund originally set-up to help enterprises to restructure. In this way, it helped to furnish Lot with the money, Wyborcza claims.

The airline reportedly needed the funds to buy Brazilian Embraer aircraft.

In theory, any enterprise which runs into trouble can apply for money from the fund. However, the company would first need to provide a restructuring plan and make its own financial contribution. Moreover, the deal would need the approval of the European Commission.

Wyborca writes that the transaction met none of these conditions, although the Treasury claims that as the funds did not come from public money, the deal was within the bounds of the law. The newspaper, however, describes the funds as coming from  "budget money."

Lot is known to have been experiencing financial difficulties over the last two years. In June, WBJ.pl reported that the company was still in the red, despite CEO Marcin Piróg’s announcement that earnings had improved by zł.25 million year-on-year.

Tara Taylor