Having chased away a perfectly good, French bidder from ailing Italian airline Ailitalia (apparently, for its Frenchness) Italy's Prime Minister-elect Silvio Berlusconi is now scrambling to save it. Well done, Silvy. However, it looks like he has few options and the one he’s chosen to pursue – a government bridge loan for the air carrier – might lead to problems with the EU and potential lawsuits from competitors.

Italy's Prime Minister-elect Silvio Berlusconi promised to recruit a new bidder for Alitalia SpA in just a few weeks but warned that "painful layoffs" for the flagship carrier were ahead.

Mr. Berlusconi's comments came a day after the government agreed to extend to the carrier a €300 million ($479.5 million) bridge loan, which will keep Alitalia flying for the time being. Italy owns 49.9% of the company.

Mr. Berlusconi won national elections last week but has yet to form a government; the departing government, led by Romano Prodi, agreed to grant the loan at Mr. Berlusconi's urging. But the emergency loan could be problematic. The European Union has warned Italy repeatedly that it would block any new attempts by the government to prop up Alitalia with state funds. On Wednesday, an EU spokesman said Italy would have to formally seek Brussels's approval before making the loan, something it hadn't yet done. If Italy goes ahead with the loan, competitors could sue to freeze it on the grounds that it constitutes unauthorized state aid.

The bigger problem with the bridge loan, however, is that it is still not clear where it would lead. Alitalia's one and only suitor, Air France-KLM SA, revoked its bid earlier this month amid increased union demands. In the recent election campaign, Mr. Berlusconi repeatedly ridiculed the Air France-KLM offer, calling it "inadmissible," and said he had spoken to dozens of Italian investors who were ready to make a counter offer.

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