WARSAW, Feb 6: The European Commission has told Poland to slash the capacity of its shipyards by 40 per cent or face hundreds of millions of euros (dollars) in penalties, Economy Minister Piotr Wozniak said on Tuesday.

But he said the request by EU competition commissioner Neelie Kroes was based on a "misunderstanding."

In a letter to the Polish authorities, Kroes cited the example of the former East Germany which had reduced the capacity of its yards by a similar proportion, Wozniak said.

"This doesn't apply to our situation. It's a misunderstanding," he told Polish public television.

Poland is ready to cut its yards' capacity, which currently stands at 750 compensated gross tons (CGT), an adjusted measure of shipbuilding productivity, but a 40 per cent reduction would amount to their "liquidation," he said. Warsaw would respond formally to Kroes at the end of the month, Wozniak added.

The European Commission is the executive body of the European Union and acts as a competition watchdog among the bloc's 27 member states.

The commission has Poland in its sights over some 2.2 billion zlotys (560 million euros, $735 million) in state support over recent years for the struggling Baltic coast shipyards of Gdansk, Gdynia and Szczecin.

Brussels has said that it expects the Polish authorities to clarify their restructuring plans for the yards, which are the country's biggest and which employ around 16,000 people.

—AFP