Europe's biggest steel producer ILVA will be taken over by the Italian Government

Europe's top steel producer in government take-over

The Italian government is set to take temporary control of Europe's biggest steel producer ILVA.

Industry Minister Flavio Zanonato said the cabinet would meet later on Tuesday to appoint a special commission to run the plant in the southern city of Taranto and complete a cleanup ordered by environmental authorities following a pollution scandal but not fully carried out by its owners.

Zanonato said the administration would ensure that production continued at the plant, which is considered an important part of Italy's industrial system and a vital employer in the economically depressed south.

The ILVA plant accounts for 40 per cent of the country's overall steel output and supplies carmakers, electrical appliance manufacturers and shipmakers.

At stake are the jobs of about 12,000 ILVA employees and at least another 8,000 contractors and other workers at the plant in a region already hit hard by Italy's longest post-war recession where youth joblessness runs near 50 per cent.

"At the end of this phase of extraordinary administration, the normal management bodies can again be formed and the owners restored full control of the company," Zanonato told parliament.

The government's plan to take over the plant through an extraordinary decree is reminiscent of a move by former prime minister Silvio Berlusconi to rescue bankrupt dairy group Parmalat in 2003.

ILVA, controlled by the Riva family, has been at the centre of a long-running court battle, and parts were put under court administration last year.

The situation came to a head two weeks ago when €8.1bn in assets were seized from the Riva family, triggering the resignation of the entire board.

A judged ordered assets to be seized from the Riva's holding company on suspicion of criminal association to commit environmental offences linked to steel production at ILVA. The Riva family said it will challenge to the asset seizure.

According to prosecution documents, decades of emissions of dioxins, benzoapyrene and other cancer-causing chemicals caused an "environmental disaster", damaging the health of Taranto residents and affecting farming and fishing for miles around.

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