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-    Aid measure NN 92/94, previously N 235/94
-    Acquisition of stake in Seleco SpA by Friulia SpA 
-    Italy
-    Proceedings initiated 

The Commission  has decided to  initiate proceedings  under Article 93(2)
of the EC Treaty against the  acquisition of just under one third of  the
equity in Seleco SpA  by Finanziaria Regionale  Friuli-Venezia Giulia SpA
("Friulia"). 

Seleco operates in the consumer electronics industry;   its main products
are  television sets,  video cassette  recorders, decoders  for encrypted
programmes and professional television equipment.

The industry  suffers from substantial overcapacity.    Last year  Seleco
made  losses  exceeding its  capital  and  reserves.     It  has been  in
persistent  difficulty  despite successive  restructuring  plans and  the
support of the Italian State,  which has been assisting it  for more than
ten years       via      the       public       finance       corporation
Ristrutturazione Elettronica SpA ("Rel").    Rel  was set up  in 1982  by
the Ministry of Industry,  which holds almost its entire capital,  with a
view to reorganizing the consumer electronics industry.    The Commission
takes  the  view  that Friulia's  action  constitutes  state  aid.    The
shareholding is being acquired  on a temporary basis.    Its sole purpose
appears to be to  ensure that production can  continue until the  private
shareholders are able  to buy back  the whole of  the equity.    The  aid
does not qualify as admissible rescue aid or restructuring aid.

The  increase  in  capital  which  involves  Friulia  coincided  with  an
agreement  to  cover  Seleco's 1993  losses.      Under  that  agreement,
Seleco's capital  was reduced  to zero,  with each  shareholder taking  a
loss  in proportion  to its  holding.     According to  the  Commission's
information, which  has not been denied  by the Italian authorities,  the
difference between the company's losses and its capital  and reserves was
made up by Rel, which wrote off loans it had earlier granted to Seleco.

Rel's action, if confirmed,  would constitute unlawful  state aid,  which
would have  to be repaid, and would  also be in  a breach of undertakings
given by the Italian authorities regarding the liquidation  of the public
finance corporation Rel.

On  preliminary examination,  it appears that the  acquisition by Friulia
of a  stake in Seleco and the  suspected action by  Rel to cover Seleco's
losses distort or  threaten to  distort competition.  The Commission  has
therefore decided to initiate Article 93(2) proceedings.

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