Loan

European Commission has ‘doubts’ Italian Alitalia loan is legal

The European Union said a 300 million-euro ($478 million) loan to Alitalia SpA may be in violation of rules forbidding another government bailout of the unprofitable national carrier.

The European Commission has “doubts” that the aid is legal, the antitrust regulator said in an EU publication today. The commission, which could force Italy to recover the funds, gave competitors one month to comment on its assessment of the Italian loan.

“On the basis of the information at its disposal at this stage” the commission “takes the view that this aid measure should not be declared compatible with the common market in accordance with the community guidelines on state aid,” the regulator said in the EU's Official Journal today.

The Italian government approved the loan in April. The funds were used to shore up the airline's capital. The commission said it has doubts that the government acted in the same way as a “prudent shareholder” would in pursuing a policy that would lead to likely profitability.

(Published by Bloomberg - july 22, 2008)