The Commission has launched an investigation into the government's measures relating to with the bird flu crisis in Italy. It says the state aid may be illegal under the EU's rules.
The investigation will look into the aid provided for under a new law, which makes provision for the purchase by the government of 17,000 tonnes of poultry meat and other poultry products.
Consumption of poultry meat has dropped by more than half in some EU states, with 300,000 tonnes and more in storage across the bloc, according to previous EU estimates. Import measures have also restricted the supply of poultry meat into the bloc.
Italy's law also suspends tax, social security contributions and payments for operators in the poultry sector. The law also allows the government to grant aid for loans relating to the conversion and restructuring of poultry undertakings affected by the crisis.
"At this stage, the aid provided for the scheme seems difficult to justify in the light of state aid rules," the Commission said in a statement.
Italy's government has one month to comment on the investigation and to provide details of its proposed aid for the sector.
In other related news the Commission yesterday announced a series of measures to extend bans on poultry imports into the bloc and amended other provisions meant to keep bird flu out of the bloc.
These include a proposal to extend restrictions on poultry imports from Hungary to 31 August 2006. An outbreak of the highly pathogenic H5N1 strain of the virus was confirmed in domestic geese in the south of the country in mid-June.
Hungary has had 20 suspected or confirmed cases of H5N1 in domestic birds, all located within the same area and within the restriction zones.
The import bans on poultry products from China, Malaysia and Thailand will remain in place until 31 December 2007. EU measures against avian influenza taken in relation to imports from Turkey was also extended to 31 December 2006.
The Commission has also decided to amend measures for Croatia. When Croatia detects a case of avian influenza in wild birds, the import restrictions will only apply to regions for which local regulators also apply restrictions. At the moment there are no restrictions in place in Croatia.
Member states also agreed to extend the deadline for the Netherlands' preventive vaccination programme. The programme was approved in February and reached its authorised deadline last week.
The Netherlands plans to make technical changes to improve the programme. The amendments include an extension of the scope of the programme to cover more species, such as geese, and changes to make vaccination cheaper and easier for hobby farmers.
While no human case of the H5N1 virus has occurred in the EU, scientists worldwide have been worried that H5N1, which can pass from poultry to humans, may mutate so that it can be transmitted from human to human and start a influenza pandemic.
Outbreaks of highly pathogenic avian influenza viruses in domestic poultry have been increasing since the late 1990s, when it was first detected in Asia, and have affected poultry in Europe as elsewhere.
The result has been a cutting off of poultry imports from key suppliers outside the EU and a plunge in consumption in some countries.
Last month, the European Commission announced an aid plan to cut down on the bloc's poultry supplies, in a bid to keep prices from plunging much more. Poultry meat and eggs are piling up in storage across the EU.
The glut has led to falling prices for poultry and egg supplies, and additional costs for storage. Cutting back on production could make prices stabilise or even rebound.
The Czech Republic, Germany, Greece, Spain, France, Ireland, Italy, Cyprus, Hungary, the Netherlands, Austria, Poland, Portugal and Slovakia have applied for aid.
The continuing fight against the spread of avian influenza throughout Europe has focused on preventing the spread of the disease to domestic flocks from wild birds.
Supplies from other countries have also been restricted. In June the Commission banned the import of all poultry and poultry products from Romania, for example.
A confirmed outbreak in domestic geese in Hungary was situated in a region where cases of highly pathogenic avian influenza occurred in wild birds earlier this year. It marked the fifth outbreak of high pathogenic H5N1 avian influenza in domestic poultry in an EU member state.
Previous outbreaks have occurred in domestic poultry in France, Sweden, Germany and Denmark. Cases of avian influenza H5N1 have occurred in wild birds in thirteen member states of the EU to date - Greece, Italy, Slovenia, Hungary, Austria, Germany, France, Slovakia, Sweden, Poland, Denmark, Czech Republic and UK.
In March this year the European Commission approved limited vaccination of bird flocks in certain areas of the Netherlands and France.
The UN Food and Agriculture Organisation (FAO) reported earlier this year that recent avian influenza outbreaks in Europe, the Middle East and Africa have caused dramatic swings in poultry consumption, increased trade bans and sharp price declines.
The UN agency expects poultry consumption shocks this year in many countries.
According to the FAO report consumption shocks are ranging from a dramatic 70 per cent decline in Italy in mid-February to 20 per cent in France and 10 per cent in northern Europe.
Following the major geographical spread of the H5N1 avian influenza virus from South-East Asia in 2005, the EU intensified its programmes for the surveillance and early detection of avian influenza, both in wild birds and poultry.
A total of 57 countries around the world have so far reported detecting the avian influenza strain, either in wild birds or domestic poultry.
Bird flu has killed 64 percent of those people known to be infected with the virus this year, according to World Health Organization statistics.
There were 217 cases of infection and 123 deaths worldwide. Most of the deaths occurred in Asia. Earlier this year four died in Turkey.
The H5N1 virus is considered firmly entrenched in poultry throughout much of Indonesia, and this widespread presence of the virus has resulted in a significant number of human cases.
This year alone, Indonesia has reported more than 33 cases with 27 deaths. Deaths have also occurred in Azerbaijan, Cambodia, China, Djibouti, Egypt, Iraq, Thailand, and Viet Nam.