EU Ruling Could Be Final Straw for French Ferry Operator SNCM

File photo of the SNCM ferry, Napoleon Bonaparte.

PARIS, Nov 20 (Reuters) – The European Commission has told France to recover 440 million euros ($595 million) in illegal state aid from long-struggling ferry operator SNCM, threatening the survival of a business the government is eager to rescue.

The CGT union and politicians said that the ruling by the European Union (EU) watchdog could result in the collapse of the Marseilles business that runs a ferry service between Corsica and mainland France.

That would put 2,600 jobs on the line in a region where President Francois Hollande’s Socialist Party risks heavy losses in municipal and EU parliament elections next year.

The European Commission, which polices state aid in the 28-nation bloc, also said it would file a lawsuit against France at the European Court of Justice for not recovering the initial 220 million euros it requested in May.

A Commission statement said that SNCM could not be weaned off state aid under its restructuring plan, making the support illegal under EU rules.

The French Finance Ministry said it had already lodged appeals in the case.

“In this legal context, the government vigorously reaffirms its determination to maintain the public service of territorial continuity between Corsica and the continent, and the jobs linked to it,” the ministry said in a statement.

SNCM is 66 percent-owned by Transdev, a public transport joint venture between Veolia Environnement and state-backed bank Caisse des Depots (CDC), while the state owns 25 percent and its employees 9 percent.

The wrangling over the repayment of state aid is holding up the sale of part of Veolia’s stake in Transdev to CDC.

Late last year Veolia said it had agreed to cut its Transdev stake to 40 percent while CDC would become the leading shareholder with a 60 percent stake. Veolia has said it wants to reduce its stake further to 20 percent as it focuses on its core water, waste and energy businesses.

Transdev lost 380 million euros last year on turnover of 7.9 billion euros. The business, which employs 95,000 people and operates train, tram, bus and other public transport networks in 21 countries, competes with Deutsche Bahn-owned Arriva and Keolis, a unit of railway operator SNCF. ($1 = 0.7394 euros) (Reporting by Leigh Thomas, Benjamin Mallet and Geert De Clercq; Editing by David Goodman)