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The European Commission (EC) has ordered Greece to reimburse up to 55 million EUR of the state aid released to Hellenic Defense Systems, a state-owned company that produces defense products. Greece has taken a number of measures to support the company between 2004 and 2011, including direct aid of 10 million EUR, a capital increase of 158 million EUR and state guarantees for loans of up to 942 million EUR.

The European Commission indicated in a notice that, according to its investigation, a large part of the measures do not fall within the scope of EU State aid control, since they are related to the security interests of Greece.

However, some measures, which are estimated at up to 55 million EUR, fall under the category of unlawful State aid, as they have helped Hellenic Defense Systems’ civil activities, which include the production of small pistols, explosives for the construction sector and fireworks.

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).