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Italy considering state entity investment in Alitalia

ROME (Reuters) - The Italian government is considering an investment by a state entity in troubled national carrier Alitalia (CAITLA.UL) while talks with Air France-KLM (PAR:AF) continue, a source close to the situation said on Monday.

The Franco-Dutch carrier is considering raising its 25 percent stake in Alitalia, but a deal is being held up by disagreements over strategy and finances.

"The government is considering how to support and help Alitalia towards a more realistic solution, which is the merger with its French shareholder Air France-KLM. It is evaluating which public entity can help Alitalia in this process," the source said.

The government has asked state railway operator Ferrovie dello Stato (FRSTO.UL) to consider investing in Alitalia, though Ferrovie CEO Mauro Moretti was not at the shareholder meeting, according to the source. Talks on the future of Alitalia will continue Tuesday after "very tense" negotiations on Monday, the source said.

(Reporting by Alberto Sisto, writing by Naomi O'Leary)