Not only are governments allows to say 'no', they are OBLIGATED to say 'no' based on the notion of "Good governance".

Any politician that grants such corporate welfare, wasting massive amounts of taxpayers money in the process, is guilty of malfeasance and should probably be recalled.  They most certainly should NEVER been elected again as they are demonstrating incredibly poor judgement.

Sadly voters don't tend to hold their politicians to very high standards of honesty or integrity.