EU set to clash with Italy on Alitalia bail-out

The European Commission said yesterday (24 April) that it would be looking into an Italian government loan to its failing national airline, causing early tension with the incoming Berlusconi government.

According to the Commission’s transport spokesman Michele Cercone, there are “a number of doubts” as to whether the €300 million loan granted by the Italian authorities to Alitalia this week constitutes illegal state aid or not. The Commission is sending them a letter requesting “more clarification”, he confirmed. 

The announcement was immediately condemned by Italy’s incoming Prime Minister Silvio Berlusconi, who insisted: “The European Union should help just causes and not create difficulties.” 

The issue represents the first potential point of conflict between the EU executive and Berlusconi, who will take up office next month and who had a history of clashing with his European colleagues during his last term as the head of the country. 

Italy insists that the loan is a purely commercial operation aimed at tiding the company over until a new buyer is found. But Cercone pointed out that even if the loan was granted at commercial rates, it could still constitute illegal aid if it is considered to have been granted in circumstances where normal banks would refuse to lend because of the risk involved. 

Rival airlines, including British Airways, have said they will be closely following the outcome, while the Irish low-cost airline Ryanair said it would file a complaint with the Commission. “This latest bailout makes a mockery of EU state aid rules. Propping up an inefficient national airline, which would have gone bankrupt long ago, is simply illegal,” said Ryanair’s head of legal affairs Jim Callaghan. 

Between 1997 to 2001 the Commission approved €1.4 billion in government restructuring aid to Alitalia. Under EU rules, the company should be excluded from any type of additional state aid until 2011. 

But according to Berlusconi, the loan is the “only thing” to do. “Alitalia cannot not be absorbed by the French,” he said, referring to an Air France/KLM offer to buy the debt-ridden company, which was in fact taken off the table last week following months of difficult negotiations. 

While Berlusconi insists there are plenty of Italian entrepreneurs, banks and airlines ready to come to Alitalia’s rescue, it remains unclear whether they will be able to offer more than the French proposal. 

Yet securing Alitalia’s future was one of Berlusconi’s main election pledges. 

It remains unclear whether Commission President José Manuel Barroso’s decision earlier this week to potentially transfer the EU’s transport portfolio to the Italians, thereby allowing them to superintend EU dealings with Alitalia, could help him to achieve this feat. “This doesn’t take anything away from the fact that the Commission takes decisions as a college,” stressed Barroso’s spokesman Johannes Laitenberger. 

The reshuffle, announced on 22 April, is viewed as a sign of impatience on the part of Barroso at Berlusconi and outgoing Italian Prime Minister Romano Prodi’s failure to come forward with a successor to the current Italian Commissioner Franco Frattini, if he stands down in order to become Italy’s new foreign minister. 

French Commissioner Jacques Barrot, currently in charge of transport, would take over the EU’s justice, freedom and security portfolio – viewed as more prestigious. This would also appease qualms expressed by the European Parliament that the candidates being touted by the new Italian government, with its strong stance on highly sensitive issues such as immigration, border controls and criminality, would not be right for the job. 

The last candidate designated by Berlusconi for the post, Rocco Buttiglione, was forced to withdraw in 2004 after MEPs’ attacks against his positions on homosexuality, the place of women in society and refugees. 

The question though is whether Italy’s handling of transport issues will be any less problematic. 

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