TARANTO, Italy — In his corner store next to Europe’s largest steelworks, Giuseppe Musciacchio dragged his index finger across a shelf caked in gray dust.
Outside, a towering smoke stack loomed above a landscape of blast furnaces and stockpiles of dangerous minerals. Dark puffs of industrial exhaust drifted in the sky like rain clouds. On “wind days,” the mayor cancels school for fear of toxic dust blowing through the town.
“I’m constantly cleaning,” Mr. Musciacchio said, showing how the metallic soot stuck to a magnet. Photographs on the wall honored his mother and other relatives who he said had died of cancer. “They died from living here, breathing here.”
Even so, as Italy’s government and the factory’s foreign operator, the steel giant ArcelorMittal, engage in a high-stakes fight over the plant’s future, Mr. Musciacchio hopes it will not close. “It would be an economic disaster,” he said.
The plant’s closing could have ramifications for the stability of Italy’s government and the country’s entire economy. That has made the struggle over the steel works an emblem for what ails Italy — declining industry, haphazard regulation and volatile politics.
Italy does not want for symbols of political mismanagement and a stuck economy. There is the perennially hobbled Alitalia national airline, the stalled infrastructure projects, the banks that need bailing out.
But the closing of the steelworks — still known by its former name, ILVA — would be worth about 1.4 percent of Italy’s entire economic output, according to a recent study. A sprawling, 15 kilometer plant, it is the largest factory in the country’s economically depressed south.
If it closes, more than 10,500 workers could lose their jobs in a region that already suffers from dizzying unemployment, especially among the young. Businesspeople fear that foreign investors would steer clear of Italy. And the country could be saddled with a toxic ghost town, with pollutants seeping into the ground and surrounding sea.
Map data by OpenStreetMap
At this point the steelworks appears to be too big to fail, and failing too much to keep running.
Its history mirrors the trouble of Italy’s broader economy, which over the last decade has, according to a leading Italian economist, experienced its lowest growth rates since the country formed in the 19th century.
Born as a state-controlled company, in the 1960s its steel-making furnaces drew workers from the surrounding countryside and became a reliable vote-getter for southern politicians.
In the boom years of the 1970s and 1980s, so many Italians had jobs connected to the business that Rinaldo Melucci, the mayor of Taranto, where the factory is located, called the town “the Milan of the South.”
In 1995, the Riva family, an Italian steel producer, bought the factory. But environmental groups and then Italian prosecutors brought to light environmental and health abuses — including toxic minerals blown into nearby neighborhoods, a factor that still prompts the mayor to close the town’s schools on windy days.
“They make us stay inside and close the windows,” said Aldo Masella, 13. “My parents want me to go to school. So do I.”
Those abuses ultimately contributed to Italy’s seizing billions of euros in assets from ILVA, and in 2014 the government took over the plant.
It put in place a legal shield to protect its new government operators from prosecution as they tried to clean up the plant.
Eventually the government decided to seek a private buyer that could turn the plant around. It found one in ArcelorMittal.
In November 2018, the company agreed to lease the plant for 45 million euros (about $50 million) a quarter. That was supposed to lead toward an eventual €1.8 billion purchase of the plant years down the road.
ArcelorMittal also said it would put €2.4 billion into the plant’s modernization and environmental cleanup. And it agreed to maintain 10,700 jobs for five years, or to pay a major chunk of those salaries and big fines for any worker laid off.
The government’s willingness to grant immunity over the environmental problems was at the center of the deal, the company says.
The legal protections “formed a critical part of the legal framework which governed the agreement,” said Paul Weigh, an ArcelorMittal spokesman. “They were an essential prerequisite” without which the company “would not have participated in the tender process, nor signed the agreement.”
But things have not gone well.
The global steel market tanked, the local authorities seized a pier critical for importing raw materials after strong winds blew over a crane and killed a worker, and the factory has produced only 4.5 million tons of steel this year, much less than the amount needed to turn a profit.
Then, in April, the government led by the populist Five Star movement, which has long attacked the factory, announced plans to end the immunity agreement — a move that ArcerlorMittal said would amount to a breach of agreement and prompt the company to leave the factory.
The standoff seemed to resolve itself over the summer, when the government collapsed and a new coalition between Five Star and the center-left Democratic Party issued a measure restoring the immunity. But hard-line Five Star members in Parliament refused to ratify it.
The protection expired on Nov. 3, and the company sent a notice the next day that it would withdraw from the factory.
The government sued the company to force it to stay. It also began negotiating a new deal, though with significantly less leverage — a situation that has thrust Rome into a fresh crisis, reviving concerns about the government’s ability to provide the stability required for foreign investment.
“It’s totally crazy,” said Carlo Calenda, who orchestrated the original deal in 2017 as minister for economic development. “You cannot better explain the Italian crisis than to explain what is happening in ILVA.”
In late December, the two sides agreed on the terms for further negotiations, including more investment from the state and a reassessment of employment and production levels.
But the plant’s fate remains in limbo, and despite a Christmas Eve visit to Taranto by Prime Minister Giuseppe Conte, optimism is not high.
In the wood-paneled offices of the local industry association, Antonio Marinaro, its president, said the government’s propensity for anti-business protests rather than constructive action had created “an air of uncertainty and instability.”
In the run-down neighborhoods around the factory, where the management’s windows sported new protective bars, residents talked of being forced to choose between their health and the jobs.
“Everybody is scared,” said Emanuele Palmisano, a local union official who worked at the plant for 21 years.
At the plant’s largest gate, a public bus brought in workers from the surrounding countryside and towns. They are resented by many Taranto residents, who say the workers get the benefit of a good job without their families having to suffer the health costs of the pollution.
Factory dust had left a red tint on the sidewalks, guardrails and a sign for the local cemetery, which had the word “ILVA” scrawled underneath it.
Mr. Calenda, who left the Democratic Party when it joined with Five Star, argued that the factory’s survival was key for Italy’s chances of attracting foreign investment.
He said steel production gave the country strategic independence from foreign competitors and supplied an Italian mechanics industry that is larger than the country’s fashion, food and furniture sectors combined.
He called the current government’s handling of the situation a self-inflicted wound indicative of Five Star’s incompetence and resistance to the free market that could cost the state hundreds of millions of dollars.
Despite having signed the original deal with ArcelorMittal, Five Star leaders now say that the company never had any intention of successfully operating the factory.
“We should be very attentive of this multinational, because it has a terrible reputation,” said Barbara Lezzi, a former minister for the South and now a powerful Five Star lawmaker who led the opposition to the immunity in the Senate.
She argued that the immunity was not part of the initial deal and that ArcelorMittal was using its removal as an alibi to leave. “They would have left anyway,” she said, arguing that its intention all along was to raid ILVA’s clients and eliminate future competition by destroying it.
She suggested that the state should temporarily nationalize the factory, modernize it and “sell it as a technological jewel.”
(The European Union has strong rules barring state aid to companies.)
Mr. Weigh, the ArcelorMittal spokesman, said the company had worked “in good faith” to modernize the factory and that it had “met every single environmental investment commitment agreed in the environmental plan approved by the Italian government.”
Some locals said they were sick of Five Star’s promises.
“They played us for the fools,” said Ignazio D’Andria, 58, who served beers to factory workers in his nearby coffee bar and recalled waking up as a child with sparkles of dust on his face and pillow.
“My mother would tell me, ‘The fairy came last night,’” he said. “We slept with the windows open. We didn’t know.”
Mr. D’Andria, with the help of an Italian television personality, has raised more than €500,000 for a pediatric cancer ward at a hospital in the town.
At the hospital, Dr. Valerio Cecinati, a specialist in pediatric oncology who recently moved to Taranto, showed the anesthesia and chemotherapy rooms, furnished with Disney puzzles, dinosaur books and new wallpaper of dolphins and turtles.
Dr. Cecinati checked in on a boy with a serious illness that he suspected was caused by exposure to the factory’s dioxins and other toxins, and said that national studies showed a small increase in children’s cancer cases in Taranto in recent years.
Judging by the fatigue and high fevers he saw in children who came in for visits, he said he believed there would continue to be more cases. “More than I expected,” he said.
Another group of pediatricians gather at pharmacies to warn people against eating locally grown and raised food, about the high level of dioxins in local women’s breast milk and about local reports suggesting a drop in local children’s IQ levels.
Mayor Melucci said that while there were negative health ramifications of the plant, “this is not Chernobyl.” He also said he was seeking to develop other industries in the town, but understood that the steel works mattered.
“If they fix ILVA, Italy comes back,” he said. “If they close, it’s the start of a great decline for the country.”
Orignially published in NYT.