The European Commission took Italy to the European Court of Justice on today over its "golden shares" in former state-owned companies, prompting Rome to say it would amend its laws to comply with Brussels' demands.
It was the latest move by the European Union executive to stamp out strategic stakes held by European governments in major companies that impede takeovers and cross-border consolidation.
This is part of wider efforts to make the 25-nation bloc's €10 trillion internal market work more effectively and minimise government intervention.
The executive also sent Hungary a final warning to scrap its "golden share" restrictions or face court action like Italy.
Brussels also accused Germany of flouting internal market rules with its restrictive savings bank law.
The Commission said Italy's privatisation law constituted an unjustified restriction on the free movement of capital and the right to set up a business. "The special powers in question have already been introduced in privatised companies such as Telecom Italia, ENI and ENEL," the Commission said in a statement.
The previous centre-right Italian government of former Prime Minister Silvio Berlusconi told the Commission in December last year that the law was justified.
But Italy's Industry Minister, Pierluigi Bersani - a member of the new centre-left government elected earlier this year - said the country would change the law to bring it in line with EU rules.
In April, the Commission said it would investigate the Italian government's decision to give itself special voting rights in gas network company Snam Rete Gas.
The government, which indirectly controls Snam Rete, issued a decree on March 23 giving the state the power to block an attempt to take over the company.
The European Court of Justice has previously ruled against countries that have golden shares in companies which enable them to retain control over privatised companies.
Earlier this year, an adviser to the Luxembourg-based court said the Netherlands should not be able to hold veto rights in its former telephone monopoly.
On Wednesday the Commission also stepped up its legal procedure against Germany over the country's savings banks. Brussels says limits on the use of the name Sparkasse to public institutions, enshrined in Germany's banking law, are a hindrance to the free movement of capital and has demanded Germany change its rules.