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UPDATE 1-Italy state lawyers warn govt of risks in Atlantia dispute - source

* State lawyers say revocation unlikely to stand up in EU Court

* Government still cool on latest Atlantia concession offer

* Some in coalition want Atlantia to sell entire Autostrade stake (Adds sources and background)

ROME, Feb 21 (Reuters) - Italy’s attorney general has warned the prime minister’s office that stripping infrastructure group Atlantia of its lucrative motorway concession could be overturned by the European Court of Justice, a government source said on Friday.

The coalition has threatened to revoke the licence of Atlantia’s motorway unit Autostrade per l’Italia following a bridge collapse which killed 43 people in the northern city of Genoa in 2018.

After months of political and legal wrangling, the government has been awaiting the attorney general’s opinion before taking a final decision on the issue.

Atlantia has always denied wrongdoing in the Genoa disaster and said it would challenge any revocation, raising the risk of a multi-billion euro compensation payment by the government.

With public debt at 135% of gross domestic product, proportionally the highest in the euro zone after Greece, Italy is wary of putting further pressure on its public finances.

The government has paved the way for a revocation by presenting legislation aimed at making it easier and less costly under Italian law.

The new rules are due to be approved by parliament this month. In the meantime Atlantia and the government have made preliminary contacts to find a compromise, but there has been no apparent progress towards a settlement.

Despite the new rules, “state lawyers stated that any revocation would be unlikely to stand up in the European Court of Justice,” said the source, who asked not to be named because of the sensitivity of the matter. The prime minister’s office was not available to comment.

Italy’s financial daily Il Sole 24 Ore first reported the legal opinion.

STRICTER TARIFF RULES

Italian Prime Minister Giuseppe Conte on Thursday urged Atlantia to make a settlement proposal before the government decides on revocation.

In an interview with Corriere della Sera daily on Friday, Atlantia Chief Executive Carlo Bertazzo said an offer had already been sent to the government, but the source told Reuters there was “not yet a convincing proposal from Atlantia.”

The source said Rome would insist on tough conditions to consider dropping its plan to withdraw the licence, wanting to set new rules on road tariff hikes which are less favourable to Atlantia and to force it to invest 4 billion euros ($4.3 billion) on motorway maintenance.

A second government source said some prominent figures within the coalition were campaigning for Atlantia to sell its 88% stake in Autostrade.

Atlantia has already offered to cut its stake to under 50% as a way to reduce the influence of the Benetton family, which owns 30% of Atlantia but has been tainted in public opinion since the Genoa disaster.

To facilitate this, Banca IMI, Goldman Sachs, JP Morgan and Mediobanca are working on a plan under which Autostrade and state-backed fund F2i would set up a joint infrastructure fund, two sources close to the matter said.

Atlantia, F2i and JP Morgan declined comment. Banca IMI, Goldman and Mediobanca weren’t immediately available to comment.

$1 = 0.9207 euros Additional reporting by Stefano Bernabei in Rome, with Francesca Landini and Steven Jewkes in Milan Editing by Gavin Jones and David Holmes

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