By Giuseppe Fonte ROME, March 6 (Reuters) - The European Commission is pressing Italy to adopt further changes to its golden power legislation, two sources told Reuters, after a first revision failed
Exclusive-EU pushing Italy for more changes to its golden power legislation, sources say
EU Pressure and Italy's Golden Power Legislation
By Giuseppe Fonte
ROME, March 6 (Reuters) - The European Commission is pressing Italy to adopt further changes to its golden power legislation, two sources told Reuters, after a first revision failed to ease Brussels' concerns that the way Rome vets banking merger deals breaches EU rules.
Background: Banking Sector Consolidation and Government Intervention
The clash, whose outcome could shape cross-border consolidation in Europe's fragmented banking sector, erupted after Italy's second biggest bank UniCredit blamed government intervention for its decision last year to abandon a takeover bid for smaller rival Banco BPM.
Brussels' Formal Warning
Brussels issued a formal warning to Italy in November, saying its golden powers used to protect strategic national interests grant the government excessive leeway to review, block or impose conditions on transactions in the financial sector.
Italy's Legislative Response
To satisfy the EU and stop the infringement procedure, Italy this year approved legislation saying the government should wait for EU decisions on "prudential and competition" issues, before invoking golden powers in deals involving banks and insurance companies.
Ongoing Disagreements Between Brussels and Rome
EU's Demand for Final Say
BRUSSELS INSISTS EU INSTITUTIONS MUST HAVE FINAL SAY
The EU considers that it is not sufficient for Italy to merely wait for any EU decision before deciding whether to adopt its golden powers, the sources with knowledge of the matter told Reuters.
ECB and Commission's Authority
Brussels is pushing to establish the principle that the government cannot set conditions on deals authorised by the ECB and the Commission within their respective areas of competence, as was the case with the UniCredit-BPM deal.
With talks entering a crunch phase, the sources, who asked not to be named due to the sensitivity of the matter, said Italy was still defending its right to protect national interests.
National Security vs. EU Rules
Under EU rules, national security is the responsibility of single member states.
The sources said Brussels is insisting that government-set restrictions on the free movement of capital within and across member states should be allowed only in exceptional cases, even when appealing to public security reasons.
Statements from the EU Commission
Asked to comment for this story, an EU Commission spokesperson said Brussels continued to engage constructively with Rome, adding that golden powers should be based on clear criteria to ensure that any action taken by the Italian authorities is justified and in full compliance with EU rules.
Italy's current legislation "overlaps with the competence of the Single Supervisory Mechanism and the European Central Bank, as well as that of the Commission," the spokesperson said.
Implications and Industry Response
Potential EU Actions Against Italy
In a separate proceeding, the EU is weighing whether to order Italy to withdraw the decree that set conditions on UniCredit's bid for BPM.
Corporate Concerns and Red Tape
Companies complain that golden powers result in undue interference in corporate affairs and increased red tape, obliging them to inform the government about their plans to avoid possible infractions and fines.
Rising Scrutiny of Deals
Italy last year received 903 notifications of deals and investments falling under golden power scrutiny, government data shows, up by 37% from 660 the year before.
(Editing by Gavin Jones)
