Croatian government decided on Thursday to provide a bank guarantee for a 300 million kuna (€40 million) loan for the Djuro Djakovic metal and mechanical engineering group and two of its daughter companies.

Based in the eastern Croatian city of Slavonski Brod, the company is one of Croatia’s largest engineering companies which makes industrial and infrastructure equipment, heavy machinery and vehicles such as locomotives. In 2018, the group posted consolidated revenue of 466 million kuna (€63 million), with a net loss of 26.4 million kuna (€3.5 million).

The group, in which the government is the largest single shareholder with a 38 percent stake, neared bankruptcy in December, when its accounts were frozen due to some 100 million kuna (€13.4 million) in unpaid bills to suppliers.

From its heyday as an industry giant in the 1980s when it employed some 18,000 workers, today the company is reduced to some 850 employees across four daughter companies.

On Thursday, Prime Minister Andrej Plenkovic said that the government would back the loan to give it a lifeline, as its collapse would “affect the county’s economic and social situation.”

“With this decision, we are giving Djuro Djakovic a chance,” Plenkovic said.

Economy Minister Darko Horvat said that the company found itself unable to secure stable financing in mid-2019, after a bank which had funded Djuro Djakovic’s railway freight cars had cancelled its backing. The cascading problems then prompted Djuro Djakovic to request a 300 million kuna bailout.

Horvat said that the decision to provide the state guarantee “The government’s bank guarantee represents support for the bailout, in line with rules on state aid and European Commission guidelines on state aid.”

(€1 = 7.44 kuna)