The European Commission has launched infringement proceedings against Italy over its use of the country’s expansive “golden power” framework, escalating a long running dispute tied to the failed takeover attempt of Banco BPM by UniCredit. The move signals growing concern in Brussels that Rome’s increasingly assertive intervention in corporate mergers may violate EU single market rules.

Golden power laws allow Italy to block or impose conditions on acquisitions involving companies deemed strategic for national security. But Brussels argues that Italy’s current application of the rules goes beyond legitimate security concerns and now acts as a barrier to cross border investment, particularly within the banking sector where consolidation efforts have repeatedly stalled.

The dispute intensified after government intervention effectively shut down UniCredit’s interest in acquiring Banco BPM, one of Italy’s largest lenders. European officials say Rome’s decision making lacked transparency and disproportionately restricted a transaction that, under EU law, should fall within the free movement of capital.

Italian officials maintain that golden power is necessary to safeguard critical infrastructure and financial stability, especially in sectors vulnerable to foreign influence. They argue that the Commission’s interpretation risks undermining national sovereignty during a period of heightened geopolitical and economic sensitivity.

Analysts say this clash reveals broader tensions inside the EU over how member states define security risks. Several governments, including France and Germany, have strengthened their screening mechanisms in recent years. But Italy’s framework is seen as one of the most interventionist, with a growing number of transactions flagged or blocked outright.

The Commission’s infringement proceeding marks the first step in a formal legal process that could ultimately lead to a ruling by the European Court of Justice if Italy refuses to amend its legislation. Such a judgment could reshape how EU countries balance national interest with market integration.

For investors, the case adds another layer of uncertainty around mergers involving Italian companies, particularly in finance, energy, telecommunications and defense. Market analysts warn that prolonged legal tensions may discourage cross border consolidation at a moment when Europe’s banking sector is under pressure to scale up.

The outcome of this dispute will help determine whether EU institutions can enforce consistent investment rules across the bloc or whether national governments retain wide discretion to shield domestic firms. For now, Brussels has made clear it sees Italy’s current approach as incompatible with the principles underpinning the single market.