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EU threatens to sue Italy again for failure to recover illegal employment aid

The European Commission threatened on Thursday to sue Italy again for the country's failure to recover illegal employment aid paid to a large amount of companies in the 1990s.

In a letter of formal notice to Italy as the first step of legal action, the European Union's executive arm asked the Italian government to provide information concerning measures taken to recover the employment aid, which was found illegal by the Commission eight years ago. The Commission said in its 1999 decision that an Italian aid scheme providing for social security exemptions to companies recruiting workers on certain types of training and work experience contracts constituted illegal state aid. The Commission also found that part of the aid paid under the scheme was incompatible with EU rules on state aid and ordered Italy to recover this incompatible aid from the beneficiaries. Five years later, the European Court of Justice, the EU's highest court, ruled that Italy had failed to implement the Commission's decision.

Although following the court's ruling, Italy informed the Commission that it had taken a number of steps to recover the money, the European Commission said only a small fraction of the illegal and incompatible aid has been effectively recovered. Italy will have two months to reply to the notice. The Commission said it may take Italy to court for the second time and seek penalty against the country if Italy still fails to comply. (