MILAN (Reuters) -Milan state prosecutors have heard testimony from UniCredit CEO Andrea Orcel and a Mediobanca executive as they look into the government's sale of a 15% stake in Monte dei Paschi di Siena to a small group of investors in November, a source with knowledge of the matter said.

The source, speaking anonymously as the investigation is ongoing, did not say when the pair were questioned and emphasised that neither were under investigation.

Mediobanca declined to comment. A representative for UniCredit was not immediately able to comment.

The Treasury was looking to build a stable core of domestic shareholders in MPS which it rescued in 2017, according to sources ahead of the sale. It sold stakes to Banco BPM, fund manager Anima Holding, construction tycoon Francesco Gaetano Caltagirone and the holding company of late Ray-Ban owner Leonardo Del Vecchio.

Soon after buying its stake, BPM became a takeover target of UniCredit as Orcel moved to thwart government plans to promote a tie-up between BPM and Tuscan bank MPS.

The Financial Times reported last year that UniCredit sought in vain to buy a 10% stake in MPS during the sale process. The Economy Ministry said the sale was handled "transparently".

It is not known which alleged crimes Milan prosecutors are investigating or who is under investigation.

UniCredit is now locked in a legal battle with the government over conditions Rome has imposed on its bid for Banco BPM. Economy Minister Giancarlo Giorgetti has threatened to resign if the government were to budge on the conditions.

On Wednesday, Giorgetti declined to answer when asked if anyone from his ministry was under investigation over the MPS stake placement.

"Prosecutors do their job, what can I say?," he told reporters on the sidelines of a parliamentary hearing.

The takeover war unfolding in Italy and the role the government is playing has raised alarm bells in the European Union and has disconcerted investors.

On Thursday, a ruling on UniCredit's takeover of BPM is expected from EU competition authorities, who are looking into the conditions Italy has set.

A separate EU scrutiny of how Italy vets banking deals is ongoing and could lead to fines.

As part of the Milan investigation police has secured documents relating to the transaction from the offices of Banca Akros, the broker that handled the process which is a Banco BPM subsidiary.

Banca Akros has said it handled the process "correctly and transparently", fully complying with applicable regulations.

(Reporting by Emilio Parodi, additional reporting by Giuseppe Fonte, editing by Elaine Hardcastle)