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* Danish government rejects Scandlines accusation
* New link would compete with Scandlines for passengers (Adds Danish transport minister comments)
By Foo Yun Chee
BRUSSELS, June 11 (Reuters) - European Union regulators areexamining a complaint by ferry group Scandlines accusing Danishauthorities of giving billions of euros in illegal statesubsidies to state-owned builder Femern A/S to build a tunnelbetween Denmark and Germany.
Construction on the 19 km Fehmarn (11.8 mile) Belt Fixedlink is due to start next year, connecting the Danish island ofLolland to Fehmarn island on the German side. It consists of afour-lane motorway and a double-track railway.
The link was estimated in 2008 to cost 5.5 billion euros($7.49 billion), in figures provided on Femern's website.
It is due to be completed in 2021, and would compete forpassengers on one of the busiest routes for Scandlines, thesouthern Baltic's largest ferry group, which carries roughly 12million passengers annually.
The EU executive can order national authorities to recoverstate aid if it is deemed to give companies an unfair advantage.
In its complaint to the European Commission, seen byReuters, Scandlines, owned by private equity investor3i, said the Danish measures included state loanswithout a fixed repayment period and various tax benefits.
"All these measures confer a selective advantage upon thecompanies through state resources, distort competition andaffect trade between member states," the complaint said.
But Danish Transport Minister Magnus Heunicke rejected Scandlines' charge.
"If our financial model for the connection over the FehmarnBelt to Germany is illegal, then the finished connections overthe Great Belt and over Oresund to Sweden are also illegal asthe financial model for all three projects are exactly thesame," he told Danish TV 2 News.
"I do not agree with Scandlines that our financial model isillegal. Today Scandlines has a monopoly on the route overFehmarn Belt, and if they wish to continue their business afterwe have finished our connection, then they are very welcome tocompete with us," referring to the government-controlled link.
The Great Belt link includes a tunnel and a suspensionbridge and runs between the main Danish islands of Zealand andFunen. The Oresund bridge links southern Sweden with Denmark.
The European Commission said it was aware of the issue.
"We can confirm that we have received and are assessing thiscomplaint," the EU state aid authority said in a statement.
Scandlines, which carries passengers and freight betweenDenmark, Germany and Sweden, also cited state-owned A/S FemernLandanlaeg, which will build and operate road and railfacilities in the Danish hinterland, as one of the aidbeneficiaries in its complaint.
Femern Landanlaeg is controlled by Danish state-owned Sundand Belt which manages Oresund Bridge and the Great Belt Bridge.
($1 = 0.7345 Euros) (Additional reporting by Ole Mikkelsen and Erik Matzen inCopenhagen; Editing by James Macharia)
