Italy’s Coalition Divided Over Sale of State-Owned Assets, Including Oldest Bank
Italy’s governing coalition is currently facing internal disagreements regarding the sale of state-owned assets, a move aimed at boosting the country’s finances amidst a challenging economic outlook. The focus of contention lies on the sale of a controlling stake in Banca Monte dei Paschi di Siena SpA, which happens to be the world’s oldest bank.
Deputy Prime Minister Antonio Tajani, who stepped in as the leader of the business-friendly Forza Italia party after the passing of its founder Silvio Berlusconi, expressed the need to expedite the privatization efforts. Tajani created controversy by stating that his party supports a push for privatization, which put him on a collision course with other members within Prime Minister Giorgia Meloni’s ruling coalition. These members have been critical of accelerating the sale of the troubled Siena-based lender.
Members of Deputy Premier Matteo Salvini’s anti-immigrant League party, the other junior partner in the alliance, refuted Tajani’s remarks and opposed rushing the sale of Banca Monte dei Paschi.
Tensions between Meloni’s coalition parties have been on the rise ahead of next year’s European elections. Forza Italia and the League have become increasingly vocal in their search for consensus.
Considering Italy’s worse-than-anticipated economic growth, financing electoral promises has become a challenge for Meloni’s administration. The country’s economy contracted in the second quarter, and there are concerns that Italy might exceed its deficit targets of 4.5% of GDP this year and 3.7% in 2024.
To address these financial challenges, Meloni’s government is contemplating the sale of Banca Monte dei Paschi and other selected state-owned assets. This move aims to allow the far-right coalition to fund new expenditures without adding to the country’s substantial debt. However, such a step could raise concerns among European Union regulators and in financial markets.
Selling these assets could also enable Rome to withdraw its involvement in the bank earlier than the end-of-2024 deadline set by European regulators.
Meloni’s administration has recently made controversial moves to exert more control over the economy, causing some investors to feel uneasy. These actions include imposing a surprise 40% tax on bank profits, introducing restrictions on how airlines determine ticket prices, and approving a decree that grants the government the opportunity to acquire a stake in the phone carrier Telecom Italia SpA.
The discussion around the asset-sale strategy took place during the Cernobbio conference, where key ministers participated, excluding Prime Minister Meloni, who chose to attend the Formula 1 Grand Prix at the iconic Autodromo Nazionale di Monza. Meloni had been in talks with forum organizers about delivering the final speech.
Giancarlo Giorgetti, the Finance Minister, represented Meloni’s government at the conference and provided insights into the government’s plans. Giorgetti downplayed expectations concerning the accelerated sale of Monte dei Paschi’s assets, underscoring that the banking sector would be resolved without external imposition of a timeline.
In recent years, Banca Monte dei Paschi has undergone extensive efforts to turn around its operations after receiving an initial bailout in 2009. The bank’s CEO, Luigi Lovaglio, has pursued strategies aimed at reviving profitability, making the institution more attractive to investors. Monte dei Paschi has been a subject of ongoing discussions in the mergers and acquisitions landscape.
Although talks between UniCredit and the Italian government regarding a potential takeover of the struggling lender collapsed in 2021, Italian media has identified Banco BPM as the most probable partner. However, a spokesperson for Banco BPM stated that the company is pursuing an independent strategy.
The clash over the sale of state-owned assets, particularly Banca Monte dei Paschi, underscores the internal divisions within Italy’s ruling coalition. As the government seeks ways to navigate economic challenges and finance its electoral pledges, finding common ground is crucial. Only time will tell how these disagreements will impact Italy’s financial landscape and its political stability.
