ThyssenKrupp cancels Greek submarine order

Mon Sep 21, 2009 2:44pm GMT

ATHENS, Sept 21 (Reuters) - German ThyssenKrupp Marine Systems said on Monday it was terminating a contract to build four submarines for the Greek navy and would seek arbitration as the country's arrears exceed 520 million euros ($762 million).

"The Greek state has long ceased to honour its contractual obligations," ThyssenKrupp said on Monday.

Greek defence ministry officials were not available for comment.

ThyssenKrupp Marine Systems (TKAG.DE: Quote) acquired the former state run Hellenic Shipyards, which competes with Neorion Shipyards (NEOr.AT: Quote), in 2005.

The orders to build four and overhaul three other submarines ran into trouble after Greece refused to take delivery of the vessel, citing technical shortcomings and design flaws.

Greek Defence Minister Evangelos Meimarakis said in January he would try to renegotiate the contract.

Simmering tensions with neighbouring Turkey have kept Greece's defence budgets high. The 2009 budget foresees 2.2 billion euros in spending on arms purchases. (Reporting by Harry Papachristou; Editing by Dan Lalor) ($1 = 0.6827 euro)

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