June 21, 2019 / 10:08 AM / 4 months ago

Breakingviews - Cox: Not all Italians dislike the French, just 33%

PARIS (Reuters Breakingviews) - At the ticket office to the sprawling villa built by Emperor Hadrian outside Rome in the second century, an attendant asked a recent visitor if he spoke English or French. “American,” came the reply. “Good,” said the ticket seller, “because we Italians like Americans better than the French these days.” 

French President Emmanuel Macron and Italian Prime Minister Giuseppe Conte shake hands at the end of a joint news conference at the Elysee Palace in Paris, France, June 15, 2018. Ludovic Marin. Pool via Reuters

While meant as a joke, the response reflects a surprising bug in the current state of European affairs: the frayed relationship between two nations whose economic and cultural similarities should arguably foster the strongest bonds on the continent. Yet the past two years have seen a handful of Franco-Italian bust-ups, largely over immigration but also industrial policy, culminating in the worst diplomatic row between them since World War Two.

To be fair, not all Italians dislike the French. But a full third of them said they do in an Ipsos poll commissioned by Sciences Po that was released at a forum on Italian-French relations on Thursday at the French university in conjunction with Rome’s LUISS. More to the point, the feeling is far from reciprocal. Only 6% of French respondents cast shade on their cousins across the Alps. And nearly two-thirds said they were sympathetic towards Italians. Something’s amiss.

While there are many explanations for Italians’ antipathy, lopsided investment flows may be part of the problem. The incursion of French corporations into corporate Italy in recent years may not have been front and centre for ordinary Italians participating in the poll during the first two weeks of June. But it has rattled politicians in Rome and boards in Milan, and leapt to the front pages from the finance sections of Italian newspapers.

Since 2009, French enterprises have gobbled up 323 of their Italian rivals compared to just 122 deals heading the other way, according to Dealogic data. Those French acquisitions were worth some $78 billion, almost seven times more than the amount that Italian firms spent shopping in France. Though France’s economy is a third larger, and companies in Italy have always been short of capital relative to their rivals, that’s still a big mismatch.

Direct equity investment reflects a similar disparity. French purchases of Italian stock have risen from 43 billion euros in 2013 to 91 billion euros in 2018, according to an analysis published by The European House - Ambrosetti, which organised the Italy-France dialogue in Paris on Thursday. Meantime, flows of Italian investment into French stock have remained mostly flat, at around 25 billion euros, during the same period.

This financial incongruity has fuelled a sentiment among many Italians that the French are buying up the country’s economic patrimony. Behind every takeover there’s a story of a successful entrepreneur who built a company employing locals, or created brands that are symbolic of the nation’s heritage of creativity. They have seen, for instance, French luxury conglomerates LVMH and Kering dominate the fashion sector, purchasing prestigious marques like Loro Piana. The two even snatched up iconic Milanese cafés Cova and Marchesi, respectively.

At the same time, French billionaire Vincent Bolloré has acquired stakes in Telecom Italia, the former telecoms monopoly, and Mediaset, Silvio Berlusconi’s media group, with an aim to influence strategy and even creep into a position of control. Admittedly, in both situations Bolloré has found his designs stymied – partly by the Italian state, but also by the courts and American activist investors. But some of Italy’s leading financial institutions, like UniCredit and Generali, have also hired French chief executives.

All of this helps explain why French Finance Minister Bruno Le Maire’s torpedoing of the proposed $35 billion merger of Fiat Chrysler Automobiles with Renault earlier this month reverberated beyond the trading floors and conference rooms of a few investment banks. While the deal was structured as a merger of equals, it would have made the Agnelli family, which controls Fiat, the leading investor in the world’s third-largest auto group, and diluted the stake of the French state.

Le Maire’s putative concern was that he feared it would put the operational alliance between Nissan Motor and Renault at risk. But the affair has left an impression in Rome – and with many Italian CEOs – that the French government is simply not willing to reciprocate on matters related to corporate control – that the playing field is not level. It was also the second time the state got in the way of an Italian takeover of a French firm. Two years ago, the government abruptly moved to nationalise a shipyard that Italian shipbuilder Fincantieri had agreed to buy.

Participants at the Sciences Po debate produced a handful of suggestions to foment better relations between the Italian and French peoples, ranging from cultural exchanges (swapping a Caravaggio for Leonardo’s Mona Lisa, or holding a French ballet at La Scala and Italian opera in Paris). Meantime a more coordinated approach to some of the critical political matters, chiefly how to handle migratory flows in the Mediterranean, and a cessation of nasty rhetoric between their leaders, would go a long way towards mending fences.

It’s probably a stretch to put the blame for a third of Italians loathing their French neighbours on a bunch of takeovers, a couple of botched deals and a stock-market raid or two. But, as Ambrosetti CEO Valerio De Molli argued, getting rid of “unjustifiably protectionist attitudes to attempts at acquisition, participation or industrial integration between players of the two countries” would also be a welcome measure. While all roads may lead to Rome, they should also travel in both directions. 


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