"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," reads the statement, published just one week after the EU executive received detailed justification of the Alitalia loan from the Italian government.
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 previously notifying the Commission, "Italy acted illegally".
The tough language marks a departure from statements made last May, when media attention regarding the case was at its height, notably due to the re-election of Silvio Berlusconi as Italian prime minister 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 its doubts about the measure, until now it has never described it as state aid or illegal. An enquiry was then opened in June, in which the Commission underlined that it could take up to 18 months to close the case.
One of Berlusconi's key pre-electoral pledges was to resolve the Alitalia crisis and at the same time avoiding a takeover by a foreign company such as Air France/KLM, which had originally bid for the airline. 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 already received €1.4 billion in government restructuring aid between 1997 and 2001 and, according to EU rules, granting such aid is only permitted as a 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 difficulty even after restructuring aid. But the problem is that the Italian authorites, given the go-ahead by Brussels, already gave Alitalia such 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 have to be reimbursed by Alitalia, which would inevitably lead to the bankruptcy of the ailing airline.
What's more, there is the almost certain breach of EU rules by Italy for not having notified the Commission of a measure about which it should have been previously informed.
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 and British Airways, have already condemned the loan publicly and could submit formal complaints.
