The tension between Rome and the market has gone up another level.

A proposed settlement between the Italian government and the operator of the collapsed Morandi bridge, Autostrade per I’Italia SpA, is faltering. Autostrade’s majority owner, Milan-listed Atlantia SpA, is taking a tough line defending its shareholders when it comes to the details of the agreement.

Meanwhile, Rome is becoming increasingly interventionist. In a separate matter on Tuesday, it sought to delay Telecom Italia SpA’s planned sale of assets to buyout firm KKR & Co.

Combined, the developments suggest a decisive agreement to end the dispute over the 2018 Genoa tragedy remains highly challenging. Altantia shares were briefly halted on Wednesday in response to the fresh deterioration in relations.

In the wake of the disaster, which claimed 43 lives, Italy moved quickly to impose heavy penalties on Autostrade. The fact that Atlantia’s lead shareholder is the deep-pocketed Benetton family energized the political assault. However, the official investigation into the bridge collapse has yet to conclude, and Autostrade has rejected allegations that it breached its maintenance commitments.

Seeking to settle, Autostrade offered 3.4 billion euros ($4 billion) of compensation, reconstruction funds, toll cuts and additional maintenance spending. Some of the expenses are spread over time and may be tax deductible. Even allowing for that, the proposal looks to be worth at least 10% of Autostrade’s equity value – consistent with penalties laid out in its highways concession agreement (save for other damages). The unit’s valuation was estimated at 14 billion euros before the disaster and the Covid-19 pandemic.

But this isn’t enough for the Italian government. It was wants to take control of Autostrade and has threatened to revoke its highways concession if the company doesn’t comply, changing the law to reduce the cancellation payment due.

At issue is the price at which nationalization would occur. Rome proposes Autostrade sell a stake in itself to Italy’s postal savings bank, diluting Atlantia into a non-controlling position. If this happened cheaply, say via a discounted initial public offering, existing shareholders would lose out.

In response, Atlantia says the price should be set by Autostrade’s “market value.” It’s proposing two options, both of which entail the state acting like any other investor. One would be a straightforward auction of its 88% holding to any potential acquirers. The other plan envisages listing the business. Then the state could bid in the market.

The proposals echo those of Atlantia investor TCI Fund Management Ltd. To pressure the government into agreeing, the hedge fund has made a formal complaint to the European Commission, arguing that Rome has breached European laws by preempting the formal investigation and by coercing the nationalization.

Clearly, it would be wrong to determine the outcome of the awful events of two years ago solely with reference to contractual claims and market forces. The question is what is the right thing to do to ensure that the families of the victims and others affected are well compensated, that suitable penalties are levied and that necessary works are carried out to prevent another tragedy.

Atlantia’s proposal does, at first glance, risk being inappropriately generous to its own shareholders. It envisages them being cashed out of Autostrade at a premium in a bidding contest. That feels like an uncomfortable and insensitive conclusion here.

But whether that is really the case depends largely on the penalties imposed on Autostrade before it is sold — not just the current settlement proposal, but also various other changes being made to its highways concession. A market-consistent nationalization could still be at a low valuation. Perhaps the real problem from a political perspective is that any direct sale of Atlantia’s holding means paying cash directly to the Benettons.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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