Italian government, ArcelorMittal dig in over Ilva row

By Giancarlo Navach and Giuseppe Fonte

MILAN (Reuters) - Italian Prime Minister Giuseppe Conte said on Tuesday he would not allow ArcelorMittal to pull out of its acquisition of troubled steel plant Ilva, as the threat of huge job losses piled pressure on the government.

ArcelorMittal, the world's biggest steelmaker, announced on Monday it was scrapping a deal to buy Ilva's site in the southern city of Taranto after Rome reneged on a pledge to grant immunity from prosecution over environmental damage in the area.

A source with knowledge of the matter said the company would not reverse its decision, even if the ruling coalition re-introduced the hotly contested legal shield.

"Yesterday's letter was final, not the beginning of a negotiation," the source said, opening the way for a potentially lengthy legal battle over the 1.8 billion euro ($2 billion) contract.

The government says the Amsterdam-listed steel group has no basis to withdraw from a contract it finalised last year and has accused the company of using the immunity issue as a pretext to walk away from Ilva because it is running up heavy losses there.

"A contract was agreed and we won't bend on this. We expect that commitments be respected," Conte, who is due to meet ArcelorMittal managers on Wednesday to discuss the crisis, told reporters in Milan.

Industry Minister Stefano Patuanelli accused ArcelorMittal of trying to blackmail the country, but suggested the government might be ready to issue a decree that spelt out existing legal protections that are already provided by Italy's constitution.

"We can consider a norm which explains this principle that is already enshrined in our legal system... without making up any specially tailored rules for ArcelorMittal," he said.

However, the source close to ArcelorMittal said this would not provide the legal umbrella the company needed.

The firm also said a recent demand from a magistrate to idle one of the furnaces at Taranto following a fatal accident there in 2015 meant it could no longer implement its industrial plan.

JOB WORRIES

The euro zone's third-largest economy has been broadly stagnant for the last seven quarters, and Ilva's problems have added to worries about Italy's eroding industrial base.

Opposition parties accused the ruling coalition, which includes the 5-Star Movement and centre-left Democratic Party (PD), of driving away foreign investors and undermining an area with some of the highest levels of unemployment in the country.

Ilva employs 10,700 people across Italy, including 8,000 workers in Taranto. Thousands more jobs depend indirectly on the plant, one of a shrinking number of large-scale industrial employers left in the south.

The 5-Star Movement has long called for the heavily polluting Ilva plant to be closed, but was forced to back the sale of the company last year to safeguard jobs.

However, some of its lawmakers baulked at the pledge to offer the firm criminal immunity over emissions while a planned cleanup upgrade is undertaken, and the protection was dropped.

Former Industry Minister Carlo Calenda, who led the bulk of the negotiations with ArcelorMittal, said coalition leaders and lawmakers had acted irresponsibly.

"They are a bunch of amateurs who have never worked outside politics for a single day. They don't know what a factory is. They don't know what it costs to do things... The right word for them is charlatans," he told Radio 24.

(Reporting by Giancarlo Navach in Milan and Giuseppe Fonte in Rome; Writing by Crispian Balmer and James Mackenzie; Editing by Jan Harvey)