Jobs threat as Alstom wins bail-out

THE French government has backed a controversial e2.8bn (£2bn) rescue package for heavy engineer Alstom, which is certain to be challenged by the European authorities in Brussels.

The deal is expected to see major job losses as part of Alstom's bid to slash costs. It was not immediately clear how many of its 118,000 employees' - 13,000 in the UK - jobs are at risk.

The French will subscribe for e300m of new Alstom shares, matching a e300m rights issue to existing shareholders. That would give the Government a 31% stake in the company, which builds high-speed trains, made a fifth of the world's power stations and is currently building the world's largest cruise ship, the Queen Mary 2.

The European Commission warned Paris on Tuesday that it faces a probe over the bail-out. This comes on top of a series of rows between Brussels and Paris over similar rescues for France Telecom, electricity giant EdF and computer maker Bull.

Paris is going even further than predicted with the Alstom deal. It has also put up e200m of a new e1.3bn loan package and is guaranteeing 65% of a new e3.5bn bond facility to provide working capital. Additional financing will come through a e900m convertible bond issue.