Italy's Golden Power Disputes: A Strategic Crossroads for Sovereignty, Banking Consolidation, and EU Tensions

Italy's "Golden Power" law, a cornerstone of its foreign investment screening framework, has become a flashpoint in the delicate balance between national sovereignty and European Union (EU) regulatory cohesion. As the Italian government continues to assert its authority over cross-border mergers and acquisitions (M&A) in strategic sectors, the law's implications for financial stability, investor confidence, and EU-wide market integration are intensifying. With the European Commission poised to escalate legal action against Italy's application of Golden Power in banking and other critical industries, the country faces a pivotal moment that could reshape its economic trajectory and its role within the EU.

Sovereignty vs. Market Integration: The Golden Power Dilemma

The Golden Power regime, first introduced in 2012 and expanded in 2023, grants the Italian government the authority to block or impose conditions on foreign investments in sectors deemed vital to national security or economic stability, including banking, energy, defense, and emerging technologies like AI and semiconductors according to White Case analysis. This power has been invoked in high-profile cases such as the failed $10.5 billion UniCredit-Banco BPM merger and the Pirelli-SinoChem deal, where the government prioritized industrial policy and foreign ownership concerns over market-driven consolidation as reported by FGS Global.

However, the EU has raised alarms about the law's broad application. In November 2025, the European Commission issued a formal warning to Italy, accusing it of violating EU law by creating "unnecessary barriers to the single market" and undermining financial stability through regulatory uncertainty. The Commission argues that Golden Power's use in banking-where it can block mergers involving domestic financial institutions-distorts competition and discourages investment. Italy, in turn, defends the law as a necessary tool to protect public savings and strategic assets, particularly in a post-pandemic economic landscape marked by geopolitical fragmentation as noted by Bloomberg.

M&A Activity and Sector-Specific Impacts

Despite regulatory tensions, Italy's M&A market has remained resilient in 2025. The country recorded 1,369 executed transactions in 2024, with a total deal value of €73 billion, driven by megadeals in energy, infrastructure, and technology. However, the Golden Power regime has introduced significant friction. For instance, the energy sector-critical to Italy's renewable energy transition-faces dual challenges of regulatory scrutiny under Golden Power and bureaucratic hurdles like lengthy permitting processes. While the government aims to generate 63.4% of electricity from renewables by 2030, foreign investors must navigate heightened oversight, potentially deterring capital inflows.

In technology and defense, Golden Power's reach has expanded to include AI, cloud computing, and dual-use technologies. A Sino-Italian aerospace joint venture was blocked in 2025 over concerns about sensitive technology transfer, illustrating the regime's strict enforcement. Meanwhile, the defense sector-already a focus of EU-wide supply chain resilience efforts-has seen increased scrutiny of foreign ownership, with the government prioritizing domestic capabilities.

Financial Stability Risks and EU Concerns

The EU's concerns extend beyond banking to broader financial stability risks. The European Central Bank (ECB) has highlighted the growing interconnectedness between banks and non-banks, noting that stress in non-banking sectors-such as private credit or real estate-could trigger systemic spillovers as stated in a press release. Golden Power's application in these areas, if perceived as stifling market integration, could exacerbate vulnerabilities. For example, the blocking of the UniCredit-Banco BPM merger-a deal that could have strengthened Italy's banking sector-has raised questions about the government's role in shaping industrial consolidation as reported by PanFinance.

Experts warn that regulatory uncertainty under Golden Power may deter foreign investment in strategic sectors. A 2025 report by Bloomberg notes that M&A activity in the financial services sector declined by 58% in Q3 2024 compared to the previous quarter, partly due to heightened regulatory scrutiny. While Italy's National Recovery and Resilience Plan (NRRP)-backed by €220 billion in EU funding-aims to stimulate growth, the continued invocation of Golden Power could undermine its effectiveness.

Reform Pathways and Strategic Balancing Acts

In response to EU pressure, Italy is considering amendments to its Golden Power framework. Proposed changes include narrowing oversight scope, adjusting sector-specific criteria, and retaining the ability to veto banking mergers. However, political resistance within Giorgia Meloni's government suggests that any reforms will prioritize national security over full alignment with EU norms as reported by Bloomberg.

The Italian government's approach reflects a broader tension between strategic autonomy and European integration. As noted by Field Fisher, Italy's FDI screening regime is part of a "strategic vigilance" trend across the EU, where member states increasingly prioritize digital sovereignty and supply chain resilience according to Field Fisher analysis. Yet, the EU's FDI Screening Regulation emphasizes the need for harmonization, urging member states to avoid measures that distort market competition as stated in White Case analysis.

Conclusion: A Crossroads for Italy's Economic Future

Italy's Golden Power disputes underscore a critical juncture for the country's economic strategy. While the law serves as a tool to protect national interests, its broad application risks alienating the EU and deterring foreign investment. For investors, the regulatory environment remains complex, with sector-specific risks in banking, energy, and technology requiring careful due diligence. For Italy, the challenge lies in recalibrating Golden Power to address EU concerns without sacrificing its ability to safeguard strategic assets. As the European Court of Justice looms as a potential arbiter, the outcome of this standoff will have far-reaching implications for Italy's role in the EU's economic and geopolitical landscape.