From Bulgaria to Wall Street, the road is long and winding. Anyone who thinks otherwise should take a look at Italian state carrier, Alitalia, which this week is in crisis following the resignation last weekend of its managing director, Mr Domenico Cempella.

There was a time, of course, when Italy's capitalist economy seemed to bear a greater similarity to the former Soviet-run Eastern Bloc than to the West. A country in which, until the mid1990s, more than 50 per cent of GDP was generated by state-run enterprises was one in which the potential for political interference in the national economy was almost endless.

Those were the bad old days, before the collapse of an anomalous political system dominated by the logic of Cold War politics. They were the days before Italy's moves, first into the single European market and then, more recently, into the single European currency - two moves which helped pave the way for a brave new world of open market competition and state privatisations.

Such radical evolution, however, with its far-reaching socio-economic implications, inevitably takes time. Looking at this week's Alitalia crisis, it would seem that not a lot has changed. This crisis looks like a blast from an all too familiar past.

For a start, Alitalia is still state controlled, with 53 per cent of its shares being held by the Treasury. Then, its chief executive appears to have resigned because of (among other things) government interference which saw senior Treasury officials negotiating the airline's future over his head. Finally, at least some of Alitalia's current problems can be linked to the failure to carry through repeated promises of a forthcoming privatisation.

At the heart of the Alitalia crisis is global consolidation in the industry. Although it is by far the largest operator in Italy, Alitalia is relatively small on a world scale, employing 23,600 people, owning 167 aircraft and carrying an annual 25 million passengers and 265,000 tonnes of freight to 66 countries worldwide.

When Mr Cempella, a longtime Alitalia employee, took over at the company in February 1996, it was obvious that one of his major priorities would be to fashion a merger with a European partner. Among the "carrots" he could bring to negotiations with potential partners would be Alitalia's development of its new hub at Malpensa, Milan, and government plans to privatise the company.

By December 1997, things appeared to be going well when Alitalia announced it had agreed a merger with Dutch carrier KLM, a merger that extended to KLM's existing alliance with US company, Northwest Airlines. KLM had doubtless been influenced by the injection of £400 million (€508 million) of state capital into Alitalia by way of recapitalisation (a procedure the EU later contested).

Some months later, KLM would have no doubt been glad to hear the head of the state holding company, IRI, Mr Gian Maria Gros Pietro, promise that Alitalia would be privatised by the end of the year. When the time came, not only had Alitalia not been privatised but Malpensa airport had opened up amidst confusion. Both rival international airlines and the EU objected to the manner in which their flights had been re-routed from Milan's smaller and more central Linate airport out to Malpensa. Complaints from environmental groups about airport noise and pollution did not help either.

It was hardly a major surprise when, in April last year, KLM controversially broke off its alliance with Alitalia. Significantly, the Dutch airline complained about the delays and confusion surrounding the development of Malpensa, adding: "An agreement was made with Alitalia on November 27th, 1998 that Alitalia would be privatised by June 30th, 2000 at the latest. The Italian government has indicated that this scenario is not attainable."

Indeed not. It is still unclear just when the company will be privatised. Last September, KLM sources repeated that the "lack of reliability of the Italian government" had proved a major stumbling block. They also expressed grave reservations about top level management at Alitalia.

Mr Cempella appeared to reiterate that view in La Repubblica this week: "I have been fighting an unequal battle against giants like British Airways, Lufthansa and Air France, all of which are discreetly or, in some cases, very obviously supported by their governments."

Intriguingly Mr Cempella's departure has been greeted with renewed expression of interest in the Italian state carrier by both Air France president Mr Jean-Cyril Spinetta and KLM managing director Mr Leo Van Wijk. The latter, however, spelt out the new ball game when saying that a future partnership could not be "an equal one" since KLM was now in profit while Alitalia was operating in the red.

Whatever about KLM's intentions, the last assertion from its chairman is true. Alitalia forecasts £163 million (€207 million) losses for the year 2000. Any buyers out there?