Italy Mulls Sale of Key State-Owned Stakes to Bolster Finances

Prime Minister Giorgia Meloni’s coalition is considering selling minority stakes in selected state owned companies to boost Italy’s public finances.

(Bloomberg) — Prime Minister Giorgia Meloni’s coalition is considering selling minority stakes in selected state owned companies to boost Italy’s public finances.

Government ministers are evaluating the disposal of some assets, including a stake in the state railway, while still retaining control over the businesses, according to people familiar with the discussions. 

Separately, officials are also counting on the expected cash flow from the government’s planned stake sale of Banca Monte dei Paschi di Siena SpA next year, said the people, who asked not to be named because the talks are confidential and not at an advanced stage.

Meloni told colleagues during a cabinet meeting on Monday that they need to pare back spending to pay for the government’s plan to cut taxes on wages and to help families in need, according to the text of her speech. Economy Minister Giancarlo Giorgetti said after the meeting that “it may be a good idea to disinvest certain assets.”

Asset sales would be one option to allow her far-right coalition to fund new spending without adding to the Italy’s mammoth debt load, a move that could set off alarm bells with European Union regulators and in financial markets. 

With the economy faltering after having unexpectedly shrunk in the second quarter, the government is confronting the prospect that it could potentially overshoot its deficit targets of 4.5% this year and 3.7% in 2024.

A strategy of shrinking corporate holdings would introduce a new facet to the Meloni government’s brand of capitalism, an approach encompassing activist intervention in corporate affairs that doesn’t shirk from upsetting investors, so long as bond markets stay happy. 

Meloni surprised investors and markets in mid-August with a decision to impose a tax on additional profits earned by banks as a result of the European Central Bank’s decision to raise interest rates. 

The government has also taken an active role in a range of corporate sectors, from finance to aviation to technology. Italy on Monday approved a decree that empowers the state to take a stake in Telecom Italia SpA’s network business, part of an effort by the increasingly activist government to assert more control over strategic assets. 

Monte Paschi

The planned sale of the Monte Paschi stake would open a new chapter in the state’s tortured engagement with the world oldest bank. The Siena-based lender has undergone years of painful turnaround efforts and was first bailed out in 2009 after being hit by souring loans and backfiring derivatives deals.

The bank’s latest plan to revive profitability under Chief Executive Officer Luigi Lovaglio has finally borne fruit. 

That means the government can wind down its involvement with the bank by the end of next year in compliance with EU requirements, while preserving Meloni’s ability to retain oversight as part of her hands-on approach to business.

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