Italy blasts Alcoa for smelter shutdown threats

* Italian minister says Alcoa faces consequences

* Alcoa says just as "upset" by EU ruling

ROME/NEW YORK, Feb 3 (Reuters) - Italy's industry minister says U.S. aluminum company Alcoa Inc will face consequences if it suspends operations at two Italian smelters.

Late on Tuesday, Italian Industry Minister Claudio Scajola told reporters on the sidelines of a business conference that Alcoa’s decision to suspend operations at the plants that employ about 2,000 people was unacceptable.

"The government will not permit unilateral decisions. Alcoa will suffer all the consequences of a rash choice," he said, without elaborating.

Alcoa said on Wednesday it is equally "upset" with the situation, which it argues was forced on the company by a European Union ruling over electricity subsidies.

"We understand the government is upset, we are upset too," spokesman Kevin Lowery told Reuters. "We didn't chose this path; it was forced on us by the EU decision. We have made it very clear we want to operate in Italy."

Hundreds of workers from Alcoa plants at Fusina near Venice and Portovesme in Sardinia marched in Rome on Tuesday as Alcoa executives met with Italy's center-right government and unions who are trying to save the plants from what Alcoa calls "structured temporary curtailment."

The talks will reconvene next Monday Feb. 8 after the Alcoa executives consult their U.S. headquarters. Italian media said Prime Minister Silvio Berlusconi had called the European Commission chief Jose Manuel Barroso over the EU executive body's ruling that Alcoa must repay state power subsidies.

Alcoa argues that a $300 million penalty imposed by the Commission -- which is under appeal -- would have a "devastating impact" when aluminum prices have fallen 60 percent. The company says it is losing $8 million a month at its Italian smelters.

Alcoa's Lowery stressed it was "an electricity issue" that both the company and the government wanted addressed, "so the operations can provide jobs."

Berlusconi, who is battling to control rising unemployment and faces important regional elections in Italy in March, wrote to Alcoa CEO Klaus Kleinfeld last Friday asking him to rethink plans to shut the smelters on February 6.

The suspension of the two plants is a political issue when Italy is slowly recovering from its worst downturn since World War II, amid signs its exports are becoming less competitive against Asian competition.

Even Pope Benedict urged Alcoa and carmaker Fiat, which plans to shut a factory in Sicily, to safeguard jobs.

Unemployment rose to 8.5 percent in December, the highest since monthly records began in January 2004, and Italy has one of the industrialized world's lowest workforce participation rates at only 22 million people from the 60 million populations.

Alcoa shares were down 3 cents at $13.61 in afternoon trading on the New York Stock Exchange.

(Reporting by Giuseppe Fonte in Rome and Steve James in New York; writing by Stephen Brown; editing by Elaine Hardcastle and Derek Caney)