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France Telecom stuck with €1bn aid bill by Euro court

A fine mess EU've gotten me into

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France Telecom has been hit for €1bn, after the European Court of First Instance rejected its appeal against a ruling that it enjoyed eight years of unfair tax breaks from the French government.

The European Commission ruled five years ago the the French incumbent enjoyed illicit state aid - in the form of business tax breaks - from 1994 to 2002, coincidentally a particularly crap time for the firm.

Funnily enough, the European Court of Justice subsequently found that France had not exactly made much of an effort to claw the cash back.

The response of France and France Telecom was to try and get the original ruling junked. That venture ran out of steam yesterday, with the the court fixing the tab at €1bn.

According to the FT, France Telecom has already said that it had made provisions for paying back the cash in its accounts.

Bloomberg quoted a France Telecom spokesman, who seemed to lay open the possibility of further legal action on the basis that the ruling had confirmed the figure in question, but not whether it was actually illicit state aid.

Whether France Telecom should be continuing the fight is open to question. The company is currently suffering as customers rein back spending in the face of the economic downturn, and is simultaneously having to retool a much needed overhaul after a spate of staff suicides. ®

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