Matteo Renzi, Italy’s media-savvy prime minister, sent out a Twitter message on Monday that he was back at his desk after his summer break. One unresolved item on his post-holiday to-do list is the stalled €12bn privatisation programme.
Plans for state sales and spending cuts were two elements that Mr Renzi took on wholesale from his predecessor Enrico Letta, whom the 39-year old former mayor of Florence ousted in a party coup in February.
Mr Letta, with the backing of Brussels, had considered early state sales a priority as a means of reducing Italy’s public debt mountain which has climbed above €2.1tn.
The main event of the programme described as Italy’s largest privatisation push since the late 1990s was the government selling 40 per cent of the national postal services operator Poste Italiane to raise at least €4bn.
But Mr Renzi has backpedalled on the listing of the postal service after a poor market debut by state-run shipbuilder Fincantieri in June. Fincantieri’s offer priced at the bottom of its range and the company had to slash its offering by a third after weak demand from international investors.
Plans to sell 49 per cent of air traffic controller Enav, and state-controlled export agency SACE have also slowed as investors have become warier of investing in Italy since data this month showed the eurozone’s third-largest economy fell back into recession in the second quarter.
In an interview with the Financial Times this month, Mr Renzi said that after the experience with Fincantieri he was taking his time with the privatisation process to make sure it “is done well and seriously”.
“We will do [privatisations] when they are in a condition to make us money. I am not in a position to be able to sell cheap, I want to sell our assets at their proper value,” Mr Renzi said.
Bankers say that Mr Renzi’s move to hold back from listing Poste Italiane until next year or even 2016 makes business sense. They argue that giving Francesco Caio, the recently appointed chief executive, more time to restructure the postal service may allow him to emulate the success of the listings of state-owned Deutsche Post and the UK’s Royal Mail.
Economists point out Italy’s third dip into recession since 2008 also means that Mr Renzi may be better off undertaking structural reforms first.
“If you do privatisations without doing reform first, the valuation at which you sell is going to be lower as investors have less confidence in the long-term growth of the economy,” says Alberto Gallo, head of macro credit research at RBS.
In the short-run, however, the delays in the privatisation process pose problems for the Treasury, which is wrestling to fulfil the government’s pledge to cut spending by as much as €34bn by 2016.
In lieu of a listing of Poste, Mr Renzi is considering a sale of 5 per cent each of Eni, the energy group, and Enel, the utilities company, people close to the government say. At today’s prices, those stakes sales would raise in excess of €5bn providing Treasury coffers with a boost. Still, analysts point out it would be only a temporary stopgap.
“Even if a genius makes everything work smoothly, how much is the state going to make from this? It is a drop in the ocean. It is not an antidote to Italy’s debt,” says Francesco Galietti, founder of Policy Sonar, a Rome-based consultancy.
Mr Galietti say the richer pickings for the Italian state may be the privatisation of the municipal infrastructure such as the local water companies but the Renzi government has not yet tackled that issue for fear it may prove unpopular with voters.