* Danish government rejects Scandlines accusation
* New link would compete with Scandlines for passengers (Adds Danish transport minister comments)
By Foo Yun Chee
BRUSSELS, June 11 (Reuters) - European Union regulators are examining a complaint by ferry group Scandlines accusing Danish authorities of giving billions of euros in illegal state subsidies to state-owned builder Femern A/S to build a tunnel between Denmark and Germany.
Construction on the 19 km Fehmarn (11.8 mile) Belt Fixed link is due to start next year, connecting the Danish island of Lolland to Fehmarn island on the German side. It consists of a four-lane motorway and a double-track railway.
The link was estimated in 2008 to cost 5.5 billion euros ($7.49 billion), in figures provided on Femern's website.
It is due to be completed in 2021, and would compete for passengers on one of the busiest routes for Scandlines, the southern Baltic's largest ferry group, which carries roughly 12 million passengers annually.
The EU executive can order national authorities to recover state aid if it is deemed to give companies an unfair advantage.
In its complaint to the European Commission, seen by Reuters, Scandlines, owned by private equity investor 3i, said the Danish measures included state loans without a fixed repayment period and various tax benefits.
"All these measures confer a selective advantage upon the companies through state resources, distort competition and affect trade between member states," the complaint said.
But Danish Transport Minister Magnus Heunicke rejected Scandlines' charge.
"If our financial model for the connection over the Fehmarn Belt to Germany is illegal, then the finished connections over the Great Belt and over Oresund to Sweden are also illegal as the financial model for all three projects are exactly the same," he told Danish TV 2 News.
"I do not agree with Scandlines that our financial model is illegal. Today Scandlines has a monopoly on the route over Fehmarn Belt, and if they wish to continue their business after we have finished our connection, then they are very welcome to compete with us," referring to the government-controlled link.
The Great Belt link includes a tunnel and a suspension bridge and runs between the main Danish islands of Zealand and Funen. The Oresund bridge links southern Sweden with Denmark.
The European Commission said it was aware of the issue.
"We can confirm that we have received and are assessing this complaint," the EU state aid authority said in a statement.
Scandlines, which carries passengers and freight between Denmark, Germany and Sweden, also cited state-owned A/S Femern Landanlaeg, which will build and operate road and rail facilities in the Danish hinterland, as one of the aid beneficiaries in its complaint.
Femern Landanlaeg is controlled by Danish state-owned Sund and Belt which manages Oresund Bridge and the Great Belt Bridge.
($1 = 0.7345 Euros) (Additional reporting by Ole Mikkelsen and Erik Matzen in Copenhagen; Editing by James Macharia)