The Italian government is to give Alitalia an emergency loan of 300m euros ($475m) in an desperate attempt to stave off the airline's collapse.

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The funds will keep Alitalia going for a couple of months while Mr Berlusconi examines options for its future.

Air France KLM dropped a bid for the firm after opposition from unions.

Fresh solutions

Alitalia is haemorrhaging cash and it was feared that Air France's withdrawal would force the firm to seek bankruptcy protection.

Mr Prodi announced the financial support following a cabinet meeting.

"Silvio Berlusconi asked me to provide a more considerable bridge loan than the one we had foreseen in order to have time to put together and organise possible alternative solutions to this problem," Mr Prodi said.

The loan is likely to be investigated by the European Commission, which has been cracking down on state subsidies for the aviation industry.

Mr Berlusconi is keen to keep the airline Italian-owned and has asked a group of banks and industry groups to draw up proposals for the firm's future ownership.

However, the airline is likely to need extra funds - potentially running into billions of euros - to tide it over while a buyer is sought.

(BBC)

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