Posts, railways… Italy under Giorgia Meloni launches a series of contested privatizations to reduce its debt

“No privatization of Poste Italiane, this is a pearl that must remain in the hands of Italians.” This is what Georgia Meloni criticized in 2018 on Facebook. However, she is now Prime Minister of Italy and is preparing to sell shares to international investors. The ultra-conservative government’s goal: to raise 20 billion euros by 2026 through privatization to curb an explosion of public debt that is the highest in the euro zone after Greece.

In addition to the Post Office, which is very profitable thanks to its insurance and banking activities, the state intends to sell part of its shares to the railway company Ferrovie dello Stato and hydrocarbon giant Eni. But for Georgia Meloni, selling off state assets is out of the question. “Our approach will be different from what we have seen in the past, when privatization meant gifts to successful entrepreneurs. »

First of all, the state intends to maintain control over its jewelry. “We can sell certain shares of public companies without jeopardizing public control,” says the head of the post-fascist Fratelli d’Italia party. While the government initially planned to maintain a 51% majority in the Post Office, Finance Minister Giancarlo Giorgetti mentioned on Friday a minimum threshold of 35%. The State Treasury owns 29.26% of the shares of Poste Italiane, to which is added 35% of the Italian Depository (CDP). If he sold his entire stake, he would receive 3.9 billion euros, or almost a fifth of the planned 20 billion.

“We believe that the Motherland cannot be sold”

This mega-plan for partial privatization was heavily criticized by the opposition. The government “always claims that it belongs to the motherland, but today it begins to sell it. We believe that the homeland cannot be sold,” Andrea Orlando, a member of the Democratic Party (left center), said on Sunday. Nevertheless, Georgia Meloni intends to “strengthen the state presence where it is needed,” as in the case of the former Ilva steelworks, which is on the verge of financial suffocation.

International investors are “all very interested” in the Italian state’s stakes, Giancarlo Giorgetti assured on Wednesday. Thanks to the expected revenues, the capital Rome intends to reduce its public debt ratio from 140.2% to 139.6% of GDP in 2026, instead of 140.6% in the absence of this measure. Is this enough to reverse the trajectory of the colossal debt, reaching more than 2,800 billion euros? “This is just a drop in the ocean. This privatization does not reduce the risk of increasing debt. This is not a structural cure,” comments Nicola Nobile from Oxford Economics.

Faced with sluggish growth and high interest rates, the government is trying to reduce its growing debt through a very generous green bonus system. With these privatizations, “the Meloni government intends to send a signal to the markets that it is solving the problem,” says Nicola Nobile.

The big disadvantage is that the state refuses lucrative dividends, which in the case of the post office reach several hundred million euros per year. “These semi-public companies like Eni are well managed and pay good dividends, which the government gives up in exchange for a lump sum payment,” explains Lorenzo Codogno, former chief economist at the Italian Treasury. And there is no indication, he said, that the 20 billion figure will be raised: “this is a very ambitious goal that will be difficult to achieve.”