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Whatever government emerges from the fractious coalition building likely after Italy’s national elections, there will be two familiar tests for the business community of its credentials.
Like a number of its predecessors, the government still has to resolve the future of lender Monte dei Paschi di Siena and of ITA, the restructured national carrier formerly known as Alitalia.
Both will involve difficult political choices for the government, most likely a coalition led by the hard-right Brothers of Italy party if current polls are accurate. How it deals with a dilemma that has bedevilled a series of Italian governments will be a sign of whether the likely coalition partners can keep their economic dirigisme tendencies in check and resist the temptation of meddling in ailing companies for narrow political reasons like most of their predecessors.
“Alitalia and MPS haven’t been profitable for decades yet they were kept alive with public funds and politically driven strategies,” said a former member of government. “The risk here is that the nationalist rightwing or the populist left continues to implement these vote-catching strategies, which have done nothing but harm to these businesses and the country’s reputation among investors.”
If the issues were easy, they would have been resolved long ago, but jobs and strategic interests are at stake. And ITA and Monte dei Paschi have a particular hold on Italians.
“I’m sorry Alitalia will [rebrand], it’s been like a family for all these years, an expensive family, but nevertheless a family,” prime minister Mario Draghi said last year as he announced privatisation plans for Italy’s chronically lossmaking airline.
Chair Alfredo Altavilla said last year that the new, shrunken version of Alitalia would be on the hunt for a deal with a larger airline before the end of 2022 because it is too small to fly on its own wings. Rome has now entered exclusive talks with a consortium made up of US fund Certares, Delta Air Lines and Air France-KLM to sell the airline despite political opposition in the midst of the general election campaign.
According to officials involved in the negotiations, the offer would give Rome two board seats and a crucial role over corporate governance and would therefore be easier to digest for politicians than a competing offer from Lufthansa. Both offers have valued the business at only €1bn.
The nationalist rightwing parties have warned this is not a matter for a caretaker government to deal with. Economic development minister Giancarlo Giorgetti, a member of the populist League party who was not involved in the talks, said the private equity-led offer is “worrying because it lacks industrial partners”.
Transport economist Andrea Giuricin added: “The problem with the Certares offer is that AirFrance and Delta Air Lines would not immediately become shareholders and ITA is too small to remain alone on the market.”
A similarly politically charged business saga is Monte dei Paschi di Siena, which cost investors and taxpayers more than €30bn since the 2008 financial crisis. After scandals and hidden losses, Siena’s largest employer underwent a government bailout in 2013 and a nationalisation four years later. It is now about to embark on its seventh cash call in 14 years. It hopes to raise €2.5bn. The Treasury has vowed to contribute at least €1.6bn.
Some politicians fear privatising the bank might lead to massive job losses. Lawmaker Maurizio Leo, a member of the Brothers of Italy, told Bloomberg this week “any decision must safeguard jobs and an asset that is strategic for Italy’s economy”.
Chief executive Luigi Lovaglio — a turnaround specialist appointed this year by Draghi’s government — said this week the bank is sounding investors for the capital raising and that it has “an enormous potential”. One Italian asset manager, Anima Hoding, said it could potentially be willing to contribute up to €250mn, according to news agency Ansa.
Despite the current challenged economic conditions, Lovaglio confirmed the bank’s profit before tax in 2024 was expected to be €700mn, more than double 2021’s result.
The Italian Treasury has indicated the planned paths for ITA and Monte dei Paschi will avoid collisions with the European Commission over state aid policies for the EU. Reversing them would agitate the commission and investors at a time when the Italian economy needs support. ITA and MPS should be set on a new, long-term, financially sustainable path, which must be neutral for Italian taxpayers. Political compromises on that point could be costly.
silvia.borrelli@ft.com
This article has been amended to clarify the comments of the chief executive of Monte dei Paschi di Siena
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