Ilva, the third-largest steel producer in the EU, is a 100 year-old Italian industrial concern whose post-war history has been marked by cycles of expansions, near-bankruptcy,  public ownership, privatisation and, recently, near-collapse.   A  year ago, the Italian government took the control of the Ilva plant in Taranto after a court sequestered  sections of it on the grounds it fails to contain toxic emissions. The productive site employs more than 15,000 workers and it is the biggest one in Europe regarding the output capacity. The Ilva case has been investigated by the European institutions  with regards to environmental and health damages since 2013, and since 2015 concerning the so called State aid. On top of that, it is important to clarify that the state aid procedure depends fundamentally on the outcome of the environmental one. Firstly, if the latter revealed a substantial unconformity of the plant with the environmental directive, the productive site would be forced to close, regardless of the outcome of the former. Secondly, the financial procedure is connected to the environmental one, because the EU wants to know whether  the Italian government has supported the company only through a green requalification process: no other scope, such as support for a high-unemployment area, would be accepted by the EU and the restitution of the estimated 2 billion euros would be invoked.

As defined by Margrethe Vestager, the European Antitrust commissioner, a state aid is any form of loan or facilitation, even not monetary, granted by a national authority of a Member State to a private firm at conditions under which no other investors would accept (i.e. a too low interest rate in comparison to the market). According to the Danish commissioner, State aid does not help in the long run, it keeps noncompetitive companies on the market and transfers problems to other member states, and it is unfair to other steel companies which, through their own means, have modernized their companies. Consequently, the European Commission (EC) asked the Italian government to suspend this financial support due to the high-competitive profile of the industry characterized by chronic oversupply as the steel production. The insistence  of  the EC aims aSLXLM​​t the presentation of a new industrial plan directed towards a massive reduction of the total output, under the promise that the Commission will help to minimize the job losses through a fund that will support people to be retrained and find different jobs in another sector. However, this project, according to many Italian government exponents, does not seem to take into account the dramatic level of unemployment and the incurable lack of job alternatives in the area. More generally, steelmakers in Europe are laying off workers and shutting down production capacity in response to a wave of cheap steel imports, particularly from China, the world’s largest steel producer. Over capacity there and shrinking steel demand has spurred many Chinese steelmakers to sell their product abroad.  In the European Union, steel imports from China have more than doubled over the past year while demand languishes below levels last seen prior to the financial crisis of 2008. This has led to a roughly 40% drop in steel prices over the past two years. Overcapacity in the steel sector has led to thousands of job losses in the European sector in recent months, not least in the U.K., and has caused steel producers around the world to seek government protection from falling prices. Tata Steel Ltd, Europe’s second-largest steelmaker, is in the process of reducing its European workforce to 26,000 employees from 30,000. Meanwhile Sahaviriya Steel Industries PLC of Thailand said in September that ​it would shut its steel plant in northern England, resulting in ​another 1,700 job losses. Ms Vestager said that unfair competition from abroad should be dealt with through trade measures, not illegal state aid and the case that state aid to artificially keep steel manufacturers afloat that are not viable seriously distorts competition and only delays their exit from the market at the cost of taxpayers. Finally, on Wednesday the 20th of January the European Union antitrust agency ordered Belgian authorities to recovered the 211 million euros from several Duferco Group steel companies for providing unfair state aid.

Due to the complexity of the case it may be useful to clarify some procedural aspects in that regard. First of all, the Ilva case is a presumed case of state aid. Basically, it means that there is no proof  up to now and it will take at least further 18 months since the beginning of the infraction procedure. In the meantime, the immediate recovery of the money cannot be disposed. At the end of the period of  investigation, the Commission decides and there are four possible outcomes: a) no state aid, b) state aid compatible with what requested (environmental requalification), c) state aid no compatible (thus, money should be recovered immediately) and d) state aid no compatible but with a proprietary discontinuity, during the 18 months, that prevents the recovery of the money. Not surprisingly, the Italian government seems to focus on the last option. Under this consideration should be read the announcement to put on sale the plant of Taranto (a not binding form of interest must be communicated within mid February). Indeed, there is no transferability of the restitution duty from the old owner to the new one. Curiously, when there is a national entity that distorts the competition there are two ways to solve the controversy: first, the recovery of money or, secondly, the disappearance from the market. Consequently, the crucial point is to assess whether the new entity would not be just the same Ilva as before with a change in the name, rather than a substantial change in terms of products, processes, autonomy and workers. In the first case the aid would not disappear. The contrary would happen in the second eventuality. At first glance, this representation would appear quite picturesque and unrealistic, but it is exactly what happened with another huge Italian company few years ago: Alitalia. Namely, it fired a lot of workers, it eliminates the flights for transport of the goods and, that combined with a limited decisional autonomy and a new organizational anatomy, allowed to ETIHAD not to pay back the state aid funded by the Italian government in the previous years. However the discontinuity principle is decided by the praxis of the Courts, because there is no an immutable principle of law in this regard. Italy’s Marcegaglia, Arvedi and Amenduni, Switzerland-based Duferco, and ArcelorMittal, the world’s largest steel producer, are all potentially interested in the plant in the southern city of Taranto, which, at full capacity, is able to produce the same volume as that produced in 2015 by Bulgaria, Croatia, Slovenia, Romania, Greece, Hungary and Luxembourg all together. Financially speaking, it is interesting to understand how these 2 billion euros are funded by Italy. 1,2 billion were collected through the issuance of new government bonds, then there is a loan bridge of 300 million euros by banks but in which the government acts as a guarantor. Other 400 million should be guaranteed to Ilva in the future months always through treasury bonds. Apart from the financial technicalities, two considerations are fundamental : first of all, when we discuss about public investments is always pretty difficult to assess the real amount of them and the technicalities are, normally, issuance of bonds and guarantees (further procedures are quite rare); in the second place it is important to say that the 1,2 billion is an advanced payment of what should be paid by the Riva family, the former owners of the plant, for the environmental damages caused to the landscape and people for years. Indeed, that amount was subtracted by the family from the company and deposited in Switzerland, where, for bureaucratic reasons, the sum has not been put at the Italian government disposal yet.

In conclusion, the writer of this short article would like to understand together with the readers a series of different elements. Firstly, the impacts of being in an integrated economic area. This affects for sure our everyday life (i.e. euro and SEPA transfers), but it has significant repercussions on companies in all phases of  businesses (i.e. permissions, regulations, liquidation procedures). Secondly, the role of the government in this scenario. We have seen that traditionally this is the approach of the Italian executive (remember FIAT and Whirpool cases, too). This is connected to the relative importance of certain companies in terms of unemployment in comparison to the whole population. Last but not least, this article underlines the importance of health and employment as starting point from which developing at a later time financial and economic considerations. According to the author, the financial ratio should never prevail over the wellbeing of the society.

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