The European Court of Justice will be asked to annul the EU special aid programme for peace and reconciliation in Northern Ireland, worth 100 million ECUs (almost £80 million).
The recommendation comes from the Advocate General of the court, Mr Jean Mischo, and is likely to be considered before Christmas.
In 80 per cent of cases the court accepts the advice of its Advocate General. His opinion followed a challenge to the programme from Italy.
The package was agreed by the European Commission in 1999, following the signing of the Good Friday agreement.
It was aimed at boosting economic development in Northern Ireland and the Border counties.
The programme involved a redistribution of Commission allocations agreed in 1994 and 1996, and a reduction in the allocations of aid to a number of member states.
The worst affected was Italy, which lost 44.7 million ECUs. France lost 18.1 million, the UK lost 16.4 million, Portugal lost 6.8 million and Germany 6 million in the reallocation.
Italy asked the Court of Justice to annul the decision, arguing that the procedure used was flawed.