Italy plans to sell off state assets

Posted on June 14, 2012

Mario Monti’s technocrat government is throwing up various lines of defence to stave off a looming budget crisis, the latest initiative being the sale of state-owned properties and assets held at the central and local level.

A cabinet meeting scheduled on Friday is expected to discuss setting up three “vehicles” or funds to acquire and manage public assets, starting within months.

    A weak property market and the inability of Italian banks to finance lending has focused plans on the likely role of Cassa Depositi e Prestiti (CDP), a state financing agency 70 per cent controlled by the Treasury which manages some €220bn in postal savings deposits from 12m Italians.

    Government officials, who asked not to be named, said the CDP could establish two separate funds for properties and companies, mostly utilities, owned by local authorities. The CDP would not become a “dumping ground” for worthless assets, they stressed. A third property fund would be managed by the state property agency.

    “This is very good, I wish only it had been done earlier. This could be a game changer for Italy,” commented Antonio Guglielmi, an equity analyst with Mediobanca Securities. “The only thing is that the market teaches us that timing is fundamental. This had to be done right away at the beginning of the Monti government…during the love affair of Monti and the market.”

    Italy’s politicians have welcomed the prime minister’s privatisation plans, which he outlined in Berlin on Wednesday, while warning him not to stage a “firesale”.

    Italy’s regional and local governments carry heavy debts of over €100bn, mostly owed to the central government. Surveys have valued their assets at €386bn , including €17bn in holdings of companies.

    Italian media have spoken of €50bn being raised through asset sales, but officials cautioned that this was speculative and the real figure is likely to be considerably less. It appears that the government has not made a decision on whether to sell down its stakes in major companies considered as national strategic assets.

    Privatisation of public utilities is an extremely sensitive political issue in Italy. Last year Italians voted in a national referendum not to privatise water companies.

    Legislators in Rome’s assembly came to blows on Monday over plans by Gianni Alemanno, the capital’s right-wing mayor, to sell part of the indebted city’s 51 per cent stake in Acea, a water, waste and electricity utility, for up to €180m.

    Additional reporting by Eric Sylvers in Milan

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