Brussels won’t let Giorgia Meloni’s government have the last word on shaping a new banking landscape in Italy.
The European Commission warned Rome on Monday it appeared to be violating the bloc’s merger rules by citing national security — or the “golden power” — to effectively thwart UniCredit’s bid for rival Banco BPM.
In a statement describing its letter of objection to the Italian government, the European Commission complained Rome had not provided “sufficient reasoning” to impose such stringent conditions on the tie-up that it risked failing.
The warning letter from Brussels puts the EU and Italy on a collision course in a highly sensitive sector.
The Commission has an exclusive competence to rule on mergers under EU competition rules, has examined the UniCredit-BPM deal and given a thumbs up with conditions limited to curbing excessive market concentration. The Italian government says the deal poses a security risk, partly because UniCredit still has operations in Russia.
Many observers in the banking sector, however, see the security block as a smokescreen to disguise what Italy’s government really wants: a far bigger role for Monte dei Paschi di Siena (MPS.)
MPS was bailed out in 2017 but is seen as a national darling that Rome would like to bulk up into a “third pole” in the banking sector after UniCredit and Intesa Sanpaolo.
Without convincing counter-arguments from Rome, the European Commission can overrule Rome’s decision, as it has done in the past with Hungary and Spain on deals in the insurance and energy sectors respectively, when they also played the national security card.
In a separate but complementary probe, officials from the Commission’s financial services directorate are also investigating whether the same decision by Rome is violating internal market rules.
Il risiko bancario
Italy is unlikely to back down easily, as undermining the UniCredit-BPM deal is only part of a bigger shakeup aimed at finding a bigger role for MPS.
The government has sought to steadily offload MPS from state hands after it was bailed out, and last year it sold a large share to BPM.
The government’s aspirations that MPS and BPM would merge to form a “third pole” fell flat, however, when UniCredit swooped in on BPM.
A ruling by a first instance administrative court on Saturday on UniCredit’s appeal further heightens the tensions with the EU executive, as it upheld two out of four of the conditions imposed by the government, largely confirming the national security argument.
Despite sending two of the conditions back to the government for review, the ruling has “fully confirmed the government’s reasoning,” Michele Carpagnano, a partner at Dentons and head of think tank Osservatorio Golden Power, told POLITICO.
The ruling also says Italy’s conditions are in line with EU rules, in contrast to Monday’s letter, the lawyer noted.
If UniCredit still can’t swallow the conditions, the fate of the deal will depend on whether it is able to secure a second extension from the Italian financial regulator, Consob, before the bid lapses on July 23.
A decision on how conditions on the deal are reimposed will ultimately be made by Meloni’s cabinet.
Still, Carpagnano noted that the European Commission and potentially the Court of Justice would have more leverage than an Italian regional court in setting merger policy.
Meddling in Milan
In Brussels and Rome alike, there are broader concerns about the Italian government’s perceived meddling in the banking sector.
Months after the hoped-for BPM-MPS tie-up was derailed, the Tuscan lender made a surprise bid for the revered Milanese investment bank Mediobanca. The tie-up between the two was seen as an unlikely fit and the European Commission has since been urged to look into the government’s role in the bid, given it remains the Tuscan lender’s largest shareholder.
Both Mediobanca and Five Star MEP Gaetano Pedullà have called on the Commission to investigate the move.
Questions have also been raised, notably by Mediobanca, over the role played by the billionaire Francesco Gaetano Caltagirone and Delfin, the holding company of late billionaire Leonardo del Vecchio. Both hold shares in MPS and Mediobanca and have long tried to influence the investment bank.
MPS formally launched its public exchange offer on Monday, and Mediobanca will have until September to decide.
“We are witnessing a dirigiste administration that, in a manner reminiscent of Soviet-style governance, applies one set of rules to its allies and another to those who operate independently of political influence,” Pedullà told POLITICO.
“The contrasting treatment of UniCredit’s bid for Banco BPM and Monte dei Paschi di Siena’s offer for Mediobanca appears designed to benefit Caltagirone, major shareholder of MPS, media mogul and close supporter of Giorgia Meloni,” he added.
The tycoon is seen as supporting the Mediobanca-MPS tie-up because it would cement his influence over the insurance giant Generali, of which Mediobanca is a major stakeholder. Caltagirone has repeatedly clashed with the insurer’s French management over its plans to form a joint venture with a French firm, which he says would put billions in Italian savings at risk.
“Italian savings mustn’t end up under foreign control,” Caltagirone told Bloomberg in an interview earlier this year,
But the Treasury takes a different view. As one official said to POLITICO last week: “The Italian people elected a sovereigntist government, why are people surprised when we do sovereigntist things?”
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