Italy for sale -#2

Debt, crisis and tax evasion keep their pressure on Italian Government and stress political relationships. In this scenario, tens of theories about sales of public assets crowd the summer debate on media, pushed by Ministers and politicians. Monti Government is now engaged in the new challenge of selling the (residual) family silver, after its recent records: the highest debt Italy ever had (1.972,9 billion euro in June, at the pace of nearly 213 millions per day from previous month, Bankitalia says) and the growth of current spending of around 120 billion euro from 2011.

In the mid of the perfect storm on Sovereign-debt, just when PIIGS are unable to build fences against the fall of trust and speculative attacks in financial markets, in a Country where the cost citizens pays for public services from ex State owned companies has grown more than inflation in the last 10 years -apart from telephone services, the cost of utilities raised from +53,6 (railway transport) to +69,8% (water) after and during the process of privatisation and liberalisation started in the nineties of the XX century- and the GDP and industrial production falls well beyond the average performance in the EU area, genial minds compete to suggest the best way to sell the last public assets which still back the emission of public bonds.

With little attention to news from markets, where Bank of Italy indicates the amount of Italian bonds held by foreign investors fell from 814 billion euro to 596 billions in the last 12 months and stock prices are at minimum, brilliant (pseudo)economists, member of the Government and its supporting parties release daily announcements on the fantastic earnings that a final sale of (part or, preferably, all) the assets still in the hands of central, regional and local Authorities could bring: stocks of defense, ICT, water and energy  companies, residential and business buildings, barracks, land, forests and islands, any other marketable asset.

It seems they ignore the many analysis on the privatisations effects and return in the past 30 years, but could start their reading from those released by Privatisation Barometer, recently summed up by, or those by Edoardo Reviglio for the Treasury Department in 2011.

At least 20 hypothesis have been presented to dramatically reduce the Italian debt in a very short time (1 to 4 years to get splendid gains from 100 to 400 billion euro but, unfortunately, the total amount of privatisations in the world was around 95 billion euro ‘in 2011), but they still should answer to simple questions like: where to find trusted buyers, how to clearly safeguard the public interest in strategic sectors, how to realise the desired price in bear markets and depressed economies, which benefits could be gained after the sale and what sort of drawbacks and costs may arise as a consequence of that in the medium and long term, how to halt the assault of Sovereign funds… and many other fundamental points to evaluate before decisions.

Anyway, one question is fundamental and, probably, will hardly find a logical answer: if the reasons for the Italian big sale is “to catch up with trust of financial markets on Sovereign debt” (this literally is the mantra), how could the ‘experts’ imagine to sell a single bond after the assets which guarantee the debt will have been privatised?

See also: Italy for sale.