The European Commission says it will halt official assistance to European yards next month, presumably to deflect charges of hypocrisy in a mounting battle against South Korean shipbuilders. The EU has criticized Korea repeatedly for providing hidden subsidies to shipbuilders, enabling them to increase market share by unfair means. Korean yards are the world's busiest, with nearly half the market. South Korean officials deny the charges and point out that European yards themselves get government aid.

The commission, the EU's executive agency, said that while it was halting aid from the end of the year, it could be reinstituted swiftly should the dispute drag on. "If no satisfactory negotiated solution can be reached with Korea, the commission will report by May 1, proposing to bring a panel against South Korea in the WTO and to establish a defensive temporary support mechanism," it said in a statement. An unnamed EU source in Brussels told Reuters that while "we think we have a strong WTO case, the time to May 1 should be for serious discussions with the Koreans. If no satisfactory solution is found we reserve the right to apply operating aid matching South Korea's illicit practices up to a ceiling of 9%" The EU, meanwhile, is proposing fresh negotiations with South Korea in a bid to prevent the dispute from going to the World Trade Organization.

The EU said Trade Commissioner Pascal Lamy should try again to negotiate an agreement with Seoul but insisted that the negotiations should reach a "concrete and satisfactory" outcome by May. The proposed talks likely would focus on establishing a price monitoring system similar to a mechanism proposed earlier this year by the commission that would include all cost inputs in the construction of a ship. South Korea has vehemently resisted that proposal in the past, saying that such information is confidential.