(BRUSSELS) - The EU Commission issued a final call to Spain on Thursday to drop its restrictions on a foreign takeover of power company Endesa, warning that court action could ensue unless Madrid acts within a month.

The move came over two months after Europe's highest court ruled that Madrid had illegally defied EU demands to the restrictions, in a case that has fuelled fears of protectionism between European nations.

Thursday's request by the EU's executive arm took the form of a "reasoned opinion", the second stage of European infringement proceedings.

After receiving a formal letter of complaint "the Spanish authorities' reply failed to inform the Commission that the illegal measures had been withdrawn and the Commission has therefore decided to pursue the infringement procedure," the Commission said in a statement.

"If there is no satisfactory reply within one month the Commission may decide to refer Spain to the European Court of Justice," it added.

The long-running case goes back to February 2006 when German energy group EON launched a hostile takeover offer for Endesa which the Spanish government fiercely opposed even though EU antitrust regulators gave their blessing to the deal.

Spanish authorities subsequently imposed a series of restrictions on the takeover, which the European Commission said broke EU rules enshrining the free movement of capital within the bloc.

The EU action is continuing despite the fact that EON has already thrown in the sponge, leaving the way clear for a bid by Italian energy company Enel and Spanish construction group Acciona.

Last July the Spanish government gave the green light to the Spanish-Italian bid but attached a string of conditions, prompting the Commission to launch further legal action against Madrid.

Among its conditions, Madrid has said Enel must guarantee supplies of natural gas to the Spanish market and present a detailed report explaining its strategy or outlining any agreements that could affect the public interest or put supplies at risk.

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