ZAGREB (Reuters) – Croatia’s five indebted shipyards want some 1.2 billion euros in state aid and up to seven years to meet European Union standards, a source close to the government told Reuters. Restructuring the shipyards is one of the most sensitive social issues in Croatia’s talks about joining the European Union, as the industry involves thousands of employees and dependent businesses and there are fears of major layoffs. The restructuring plans were submitted to the government last Friday and are subject to approval from both Croatia’s state competition watchdog and Brussels, which wants to see the shipyards operating in a sustainable way with less state aid. «The amount involved clearly shows that state aid to shipyards cannot continue as in the past,» the source said. If the plans are approved, Croatia will be able to start negotiating over competition policy in its EU membership talks, one of the most difficult policy areas. Zagreb, which hopes to wrap up the EU talks next year and to join the bloc by 2012, would like to keep all five shipyards but this could prove a tall order. «We will do our utmost to achieve that, but we have to wait and see,» the source said. Only the Uljanik yard in the northern Adriatic town of Pula turns a profit, while other docks have piled up debts due to inadequate management, the rising price of steel and a weaker US dollar. Ozren Matijasevic, a union leader who sits on the government’s committee for shipyard restructuring, said the state should write off the shipyards’ debts to get a clean financial sheet. «Then all five will try to prove they can run a sustainable business, which means they will have to sell the non-core businesses and lay off some of the work force. And in the end, the EU will assess how feasible the plans are,» he told Reuters. The Jutarnji List daily published details of the restructuring plans on Tuesday, noting one of them, Brodotrogir, wanted three years to prepare for EU rules, while the biggest underperformer, Brodosplit, said it would need until 2015 before it could operate without state subsidies. The subsidies currently amount to 400 million kuna a year in cash, excluding state guarantees on loans. Both the government source and Matijasevic said a paramount issue was Zagreb’s effort to convince Brussels not to treat state guarantees as cash subsidies.