The EU yesterday rejected Poland's plans for restructuring the Gdansk shipyard, leaving the spectre of bankruptcy hanging over the historic birthplace of the anti-communist trade union Solidarity.

Brussels insisted that it did not want to drive the shipyard out of business, but it demanded that Warsaw streamline Gdansk more radically and more quickly than suggested in a proposal to the EU last month.

Grappling with the highest jobless rate in the EU, Poland has been loath to streamline Gdansk and two nearby yards, Gdynia and Szczecin, which have soaked up €1.3 billion in EU aid since the country joined the bloc in 2004.

The EU has now welcomed Warsaw's plans to scale down operations at Gdynia and Szczecin, and they will not have to give back any money, but the government's failure to come up with a viable plan for Gdansk could result in a demand for repayment of perhaps €50 million in subsidies, a bill which could bankrupt the historic yard.

Poland says it is willing to shut one of Gdansk's three slipways now and close all three after 2012, when a floating dock for shipbuilding would replace them. But commission officials insist that two of the slipways must be closed in the near future - a move that Polish officials say is too drastic, would cost too many jobs and would make it hard to sell a major stake in the shipyard to foreign investors.

"The commission is not seeking the closure of the Gdansk shipyard," EU internal markets commissioner Charlie McCreevy told members of the European Parliament.

"We would like to see the yard undertake a genuine, far-reaching restructuring so as to become a successful company capable of competing on its own merits in the EU and in the world shipbuilding market," he said.