The US ambassador to Rome criticised Italy's ability to attract foreign investors on Thursday after an American telecommunications company dropped its bid for a key stake in Telecom Italia (TI).
In a letter published on the front page of Italian daily Corriere della Sera, Ambassador Ronald Spogli said AT&T's decision to quit negotiations for TI "clearly showed the fear of investing in a market where the rules are unpredictable".
"Investments do not arrive where they're not welcome and where market rules are continually changing," Spogli said.
AT&T withdrew its 2.7-billion-euro bid for TI on Monday, citing "regulatory uncertainties". The American company had been in talks with Pirelli, the tyre group which controls 18% of TI through holding company Olimpia.
AT&T was considering buying a third of Pirelli's 80% stake in Olimpia with Mexico's America Movil - which still remains interested - buying another third.
The potential operation drew heated protests from unions and members of Premier Romano Prodi's centre-left government.
TI was privatised in 1997 but the government still holds veto powers over the ex-monopoly's corporate decisions.
The premier himself said on Tuesday that he hoped the 44-billion-euro firm would remain Italian but has firmly denied interference over the AT&T offer.
But AT&T said on Wednesday it might reconsider its decision if the regulatory situation improved and political hostility to the deal stopped.
AT&T Chief Operating Officer Randall Stephenson said that "there were too many uncertainties to invest capital in Italy", confirming that "political resistance" was partially to blame for its withdrawal.
In his letter, Spogli said: "Often barriers are raised against foreign companies planning to invest in Italy... One of the first reactions to the interest of a foreign group is to underline that the national interest must prevail".
The ambassador advised the Italian government and business world to take a "more open approach" and "focus less on who is investing and more on the fact that Italy is among the bottom countries in Europe in terms of GDP growth, wage increases and productivity".
He said this was why the level of of investments in Italy was "so scarce", citing data showing that new foreign investments in Italy in 2005 amounted to $20 billion compared to France's $60 billion and Britain's $165 billion.
The letter risked creating tensions with the government.
Spogli was quoted by the media on Tuesday as saying among other things that "in Italy, there is a long tradition of a very strong government presence in the economy".
But Prodi told reporters the day after that the ambassador had contacted him to tell him that he had been misquoted by the Italian press.
The foreign ministry said on Thursday that "it would be ungenerous to view the government's actions as a bid to obstruct foreign investments in Italy".
"Italy's main interest is to attract investments... It is aware of the low level of foreign investment and the need to relaunch it," foreign ministry spokesman Pasquale Ferrara said at a press briefing.
Prodi insisted on Wednesday that the government had not meddled in TI.
"It's incorrect to say the government intervened in the TI case. The government limited itself to observing that TI represents a key company for Italy's economic growth and, as such, can be defined as 'strategic'," the premier said.
But Pirelli Chairman Marco Tronchetti Provera has blamed the government, saying that "scaring off foreign investors is not the way to protect the interests of shareholders or the country - it just destroys a firm's intrinsic value."
Tronchetti Provera quit as TI chairman last September after clashing with Prodi over company strategy.
He appealed to politicians this week to respect the "freedom of businessmen to make decisions according to their legitimate interests and free-market criteria".
MEDIASET INTEREST IN TI.
Meanwhile, Mediaset, the private TV network owned by former premier and opposition chief Silvio Berlusconi, said on Thursday it was interested in a small stake in TI.
Mediaset Chairman Fedele Confalonieri said: "It's obvious there's interest. It's an operation that makes sense". But he ruled out any intention to take control of debt-laden TI, saying "certain things can't be done".
Mediaset Deputy Chairman and Berlusconi's son Pier Silvio Berlusconi subsequently stressed that his company was "not in any direct talks" as yet.
Speculation has been rife in the Italian media that Berlusconi, a billionaire media mogul and Italy's richest man, is planning a bid for TI, possibly with the help of Piaggio motorbike and scooter-maker chief Roberto Colaninno.
The rumours sparked a flurry of worried reactions from centre-left lawmakers, who said such a deal would add to Berlusconi's conflicts of interest and break current media laws - although centrist Justice Minister Clemente Mastella broke ranks by saying a Fininvest move "would not be inappropriate".
Turin daily La Stampa reported on Thursday that Spanish phone operator Telefonica still had its eye on TI and was mulling a 4.8-billion-euro bid for 66% of Olimpia.
