THE Daily Echo can today reveal that an Italian government grant - which broke Euro rules - was behind Pirelli switching production to Italy with the loss of 312 jobs in Hampshire.

Eastleigh MP David Chidgey and Hampshire MEP Chris Huhne have branded it a scandal and are battling to reinstate jobs at the Bishopstoke fibre optics factory, which is currently mothballed.

The £50m subsidy was approved by the powerful European Commission but, crucially, the Italian government did not disclose that an essential part of the deal involved closure of the Eastleigh plant.

Strict European Union competition rules bar government grants like this because it doesn't create a level playing field of competition.

Mr Chidgey and Mr Huhne - who made the shocking discovery after tabling a question in the European Parliament - are demanding an inquiry by the European Commis-sion and that Pirelli pay the cash back. The Italian government is footing almost half of the cost of the new optic fibre factory in Battipaglia, southern Italy.

Mr Chidgey said: "It is ironic that the extension to their Naples fibre optics plant creates 311 jobs, while 312 workers were sacked when Pirelli closed a similar factory in Eastleigh.

"A worker said that the equipment at Pirelli Bishoptoke was being shipped to Italy. It looks like a clear transfer of jobs which is banned by the European Commission.

"I shall not be satisfied unless the European Commission withdraws its approval of the state subsidy that cost more than 300 jobs in Eastleigh. They should confirm that their rules have been breached and then insist that Pirelli pays the £50m subsidy back to the Italian government."

Mr Huhne took up the case at the request of his Liberal Democrat colleague David Chidgey and the pair are now asking to meet shop stewards from the Pirelli factory to plan the next steps in the campaign to save the Hampshire jobs.

Mr Huhne said: "This aid should create new jobs in the depressed area, not merely shift jobs from another part of the European Union.

"Given that Pirelli's subsidiary Fibre Ottiche Sud claimed to the Commission that the project would create 311 direct jobs and 108 indirect jobs in southern Italy, and that Pirelli has announced 312 job cuts in Eastleigh since March, this looks like a straight switch.

"The Italian taxpayer is paying to import British jobs, which is outrageous and illegal under EU rules."

A European commissioner in charge of competition policy said in a reply to Mr Huhne: "The commission is not aware that Pirelli's investment constitutes a transfer of production from the United Kingdom to Italy."

Both Pirelli and the Italian government were unavailable for comment.