Alstom shares hit by EU warnings on rescue

PARIS, Sept 10 (AFP) - Shares in the French engineering group Alstom slumped by 10.56 percent on Wednesday after EU competition authorities had sent warning signals about a state-orchestrated rescue.

The shares, already severely depressed by financial strains which have brought the group to the verge of collapse, fell by 10.56 percent to 2.71 euros.

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On Tuesday the EU Commission warned that the French state should not participate in recapitalisation of Alstom until the commission had completed a an investigation under EU competition law, a process which could take several months.

The rescue plan agreed upon by the French state and scores of international banks provides 2.8 billion euros (3.1 billion dollars) in various forms.

Under terms of the accord, the state would take a 31.5-percent stake in Alstom through participation in a capital increase and by providing loans and loan guarantees.

One dealer in Paris, who declined to be named, said: "Newspaper articles this morning highlight differences of view between the European Commission and the French state over Alstom and the capital increase.

"Apparently Brussels does not appreciate the way Paris is going about this and matters are made worse because there are other areas of friction, particularly over the (French) public deficit."

However, an analyst at Fideuram Wargny, Didier Orand, commented: "I think that all of this is very formal. France did not notify its aid when it should have done, but that does not take account of the urgency of the situation... All this does not cast doubt on the rescue plan."

"In any case, neither the state nor the creditors, nor the shareholders are not going to abandon Alstom. The social, industrial and economic consequences for the creditors would be to great," Orand also said.

The industrial giant, which employs 118,000 people in more than 70 countries, builds power turbines and transmission equipment, ships including the Queen Mary II, and France's high-speed TGV trains.

Brokers also said the stock's high volatility was scaring off big institutional investors.

"It's a share that doesn't interest us," said a broker at a big bank.

"It's very volatile and the variations don't mean anything. One day the stock is up 25 percent and another it's down 10 percent depending on what's going on with the bailout plan," he added.

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