EU to label Italian loan for Alitalia 'illegal'-source

BRUSSELS, June 6 Fri Jun 6, 2008 9:56am EDT

BRUSSELS, June 6 (Reuters) - The European Commission will tell Italy on Wednesday that an Italian decree for a 300 million euro ($468.2 million) loan to help Alitalia AZPIa.MI avoid bankruptcy was illegal, a European Commission source said on Friday.

The Italian government has allowed Alitalia to count the loan as capital on its books and issued new rules on the airline's sale, both of which are part of a new decree that came into effect earlier this week.

The decree must still be approved by both houses of parliament before it can become law.

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