"On the basis of the information at its disposal at this stage, it takes the view that this aid measure should not be declared compatible with the common market," reads the Commission statement, published just one week after receiving detailed justifications from the Italian government on the Alitalia loan.
The loan "provides Alitalia with an economic advantage it would not have had under normal market conditions," it explains.
Brussels also makes it clear that by lending the debt-ridden national airline the money without prior notification to the Commission, "Italy acted illegally".
The tough language diverges from statements last May, when media attention to the case was at its height, notably due to the re-election of Silvio Berlusconi as Prime Minister of Italy and the subsequent takeover of the European Commission's transport portfolio by his political ally Antonio Tajani.
At that time, the Commission announced only that it intended to further investigate the government loan. While Brussels had made clear it had doubts about the measure, it had never yet labeled it as state aid or illegal. An enquiry was then opened in June, in which the Commission had underlined it could take up to 18 months before closure.
One of Berlusconi's key pre-electoral pledges was to resolve the Alitalia crisis, while avoiding its takeover by foreign company, such as Air France/KLM, which had originally bid for it. Italy insists that the loan is a purely commercial operation aimed at tiding the company over until a new buyer is found.
But the problem is that Alitalia has already received €1.4 billion in government restructuring aid between 1997 and 2001 and, according to EU rules, the grant of such aid is only allowed as one-off measure every 10 years. The company should thus be excluded from any type of additional state aid until 2011.
The only aid allowed in breach of the so-called 'one-time-last-time' principle is "rescue aid", which can be granted to companies in difficulties even after a restructuring aid. But the problem is that the Italian authorites, with Brussels' go-ahead, already gave Alitalia such an emergency aid in 2004. The Commission is therefore pointing out that any other aid should not have been granted before 2014.
If the current loan is ruled illegal, it would lead to the reimbursement of the loan by Alitalia, and inevitably to the bankruptcy of the ailing airline.
What's more, there is the almost sure breach of the EU rules by Italy for not having notified a measure that should have been known by the Commission before it took place.
The Commission's statement was part of a formal invitation to interested parties to present comments on the loan. Rival airlines that feel affected by the loan and hope to obtain some of Alitalia's market share, such as Ryanair, Air France or British Airways have already condemned the loan publicly and could submit formal complaints.
