The Italian government stopped the proposed merger between Autostrade, Italy’s largest motorway company, and its Spanish counterpart Abertis. In a joint statement the infrastructure minister Antonio Di Pietro and the minister for economic affairs Tommaso Padoa Schioppa say that the merger violates the terms of the 1999 privatization, under which no construction company can enter the Autostrade shareholding. Abertis’ main shareholder is Grupo ACS, the world’s third largest construction company, that would hold a 12.5 percent stake in the new company resulting from the merger.

Mr Di Pietro indicated, however, that even if ACS was not a shareholder the merger would probably not have been approved. Since the merger was announced right after the April national elections – and before the new leftist administration was formed – the Left have expressed concern about the possible reduction of the level of investments and the reduction of quality and safety standards. Similar concerns have also come from the Right.

It is correct that the ban on construction companies was included in the terms of Autostrade’s privatization, but it is questionable that the ban should stay in force indefinitely. The ban on construction companies entering the shareholding makes no sense since construction companies do actually own stakes in other Italian motorway operators. Moreover, when the merger with Abertis was first announced top politicians, including prominent members of the present government, asked Italian companies, including construction companies, to bid for Autostrade in order to prevent a foreign company from entering the business.

The ban on construction companies – a provision unknown in other European countries – was introduced to prevent that a construction company providing maintenance to the motorway would inflate the costs in order to translate most of them into higher tolls. That, however, can happen only insofar as the construction company owns a majority stake, because otherwise other shareholders would refuse to pursue policies that might harm their own interests. Moreover, since tolls are fixed by the government, that is a mere regulation problem, nothing else. The level of the tolls depends entirely on decisions taken by Italian politicians, not on the nationality of the shareholders. Similarly, the level of investments does not depend on whether the operator’s headquarter is in Italy or in Spain; it depends on the terms of concession and the ability to enforce them. So far Autostrade – a fully Italian company – has invested less than expected, mostly because of difficulties in the authorization process for the investments themselves.

It is clear that the construction companies clause is just a pretext. From the beginning most objections focussed on the “strategic nature” of motorways and the risk of shifting the control of such a facility to a foreign country. To put it otherwise, Rome fears that Italian consumers can no longer rely on Autostrade if the company is foreign owned. The opposite is true. If the merger goes through the new company will be less persuasive vis-à-vis the government, and the latter will probably be tougher in negotiating the level of the tolls (which according to many experts are too high in Italy). Moreover, if no barrier is set to mergers with foreign companies or to foreign takeovers, the business environment is such that any asset eventually goes to those who value it more, and consumers are most likely to gain from such competitive pressures.

The Italians would do well to take a more sensible position on foreign mergers, because the unintentional consequences of protectionism might turn out to be very bad. The decision to block a Spanish company from acquiring Autostrade diminishes Italy’s credibility in calling for European integration. This is bad for Italian companies which are hampered by foreign governments in their own international mergers and acquisitions. The European Commission will probably take Italy’s complaints about France’s opposition to Enel’s bid for Suez less seriously. Italy is engaging in the same kind of economic patriotism that is an obstacle to the creation of an internal market in Europe, where national and European authorities should play the role of regulators rather than directly intervening in the economy. The integration of the European economies is the core of the European dream – that led to the creation of the European Community and then the European Union – and the best tool to make the continent more competitive and dynamic.