In a sharp break with its paternalistic past, Italys new government has ordered a major state company to go into de facto bankruptcy. Prime Minister Giuliano Amato has announced the liquidation of EFIM, a defense and heavy-industry combine burdened with $7.5 billion in debt.
But the surprise move could make borrowing much more costly for Italy in the future. The governments unilateral rescheduling of EFIM's debt has outraged foreign banks. Standard & Poors Corp., which does not rate EFIM, says it may soon downgrade the ratings of other Italian public sector companies as well as banks that borrow internationally.