(AFP) Italy on Monday denied charges of protectionism as Alitalia held a shareholders meeting to approve a capital increase that would see the public postal service take a stake in the troubled airline.

The cash-strapped private flag carrier’s board gave an initial go-ahead to a plan on Friday to boost capital by 300 million euros ($407 million) and take a bank loan of 200 million euros.

The position of French-Dutch group Air France-KLM, which owns a 25-percent stake in Alitalia and had been interested in increasing this further, was still uncertain ahead of the crucial meeting.

The government says the plan does not preclude a tie-up between Alitalia and Air France-KLM and has asked the group to give its support even though its stake could be reduced to 10-11 percent.

Board approval allowed Alitalia to keep its regular schedule over the weekend, following threats from energy major Eni that it would stop supplying jet fuel because of unpaid debts.

But the capital increase has sparked heated criticism in Italy over the intervention of a public company into the debt-laden airline, which was already bailed out by taxpayers five years ago.

The Financial Times also condemned the proposed deal in an editorial saying that a new wave of “protectionism” could put off investors in Italy.

“This is not protectionism but the exact opposite,” a government source told AFP.

It is “a way of better accompanying Alitalia towards integration with a foreign partner.”

Transport Minister Maurizio Lupi on Sunday said that “the state has not and will not spend a single euro from the pockets of its citizens.”

Lupi also said the proposed plan “would allow a company like this to negotiate with Air France without being in a position of weakness.

“The government will try, firstly with Air France, then with other international partners, to relaunch a strategic sector for us,” he said.

SOURCE AFP