Italian privatisations: ‘Draghi Boys’ should embrace a smaller state

Prime Minister “Super” Mario Draghi wants to take Italy to the next level. EU recovery funds will boost transport, technology and environmental efforts. Reforms to Italy’s bloated and Byzantine bureaucracy are on the agenda. In an ideal world, widescale privatisations would be too.

Draghi’s to-do list already includes a “final” clean-up of an Italian banking system still littered with the debris from the financial crisis. That means returning the government’s stake in Monte dei Paschi to private hands.

A break-up of the world’s oldest bank looks the most likely outcome. Failure to extend tax incentives for buyers suggests urgency among politicians to get a deal done before more non-performing loans stack up. UniCredit is reportedly planning to dispose of €2bn in NPLs on what could be a deck-clearing exercise.

Privatisation of other government stakes would bolster Draghi’s credentials as an economic liberaliser. Influence extends to the boards of some 90 public companies. Dario Scannapieco, one of the protégés known as “The Draghi Boys”, could undertake a selldown as newly-appointed boss of state investment bank Cassa Depositi e Prestiti.

Predecessor Fabrizio Palermo, appointed by Giuseppe Conte, made the CDP increasingly active. Its tentacles extended to digital payments group Nexi-SIA and Autostrade, a motorways group.

It is unlikely that CDP would ditch those stakes or shares in Telecom Italia and broadband network Open Fiber. Bankers and investors are marginally more likely to get new exposure to businesses with weaker connections to government policies.

State control of national energy companies could be loosened to allow the market to better dictate the terms of decarbonisation. That could put CDP shares in gas groups Snam and Italgas worth €6.2bn on the table. The same applies to the CDP’s stake in energy group Eni valued at €10bn.

Italy should also think about reducing holdings in electric utility Enel, Poste Italiane and aerospace group Leonardo. These are worth €19.3bn, €10bn and €1.2bn respectively.

Interventionism is a tradition dating back to imperial times. But, at the margins, there is scope for government to streamline its portfolio — and for private sector investors to deploy more capital in Italy.

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