The European Commission (EC) has reached a decision that Italy's emergency loan of 300 million euro for the ailing carrier Alitalia is unlawful state aid and must be suspended, reported la Repubblica.

The EC will officially open a course of action against Italy on the 11th of June, said the newspaper without mentioning its source.

The emergency loan, granted in the month of April by the previous government of Italy, was intended to keep the struggling carrier operating while newly elected Prime Minister Silvio Berlusconi attempted to gather Italian investors to prevent its liquidation.

However, those investors have not turned up, which means that the troubled carrier will come under renewed financial crisis if the loan is suspended by the EC.

The newspapers said that after the announcement of EC's decision, Italy will have fifteen days' time to tell the EU executive how it plans to proceed.

On Wednesday, Milan's bourse put off trading in Alitalia's shares, convertible bonds and all other financial instruments attached to the carrier.

After working against the plans of the previous government to permit Air France-KLM to buy Alitalia, incoming Berlusconi made his stance softer on Tuesday saying that Air France may be a good partner for the Italian carrier.

Air France-KLM, however, has said that restarting negotiations would not be easy. It withdrew a takeover bid for the Italian carrier in the month of April due to political pressures and opposition from the union.