EC rules against illegal 'subsidy' of France Telecom

'Psychological state aid'

The European Commission is to take action against the French government for illegally subsidising France Telecom. But the accusations do not centre on illegal loans.

Originally the government faced investigation over a €9bn credit line, which the Commission now accepts did not exist. Instead the eurocrats are claiming comments of support by French officials amount to unfair state aid. The Commision believes it has found legal precedents in French law which support its claim that there is a financial value to such messages of support, according to the Financial Times.

The French government has labelled the action an attack on "psychological state aid".

In 2002 France Telecom built up debts of €70bn while acquiring companies at the height of the technology and telco boom. It was reported at the time that the French government was bailing the telco out with a €9bn loan. ®

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