Italy can quickly raise as much as 40 billion euros ($54.5 billion) of assets to help reduce Europe’s second-biggest debt that now tops 1.9 trillion euros, according to documents published today.
The government in the short term could sell as much as 30 billion euros in real estate and 10 billion euros in carbon permits, according to a document posted on the Finance Ministry’s website. The funds could be used to cut Europe’s second-biggest debt, which was about equal to the total value of all government assets, state-owned lender Cassa Depositi e Prestiti SpA estimated in a separate report based on 2004 data.
“The scope of the plan seems very insufficient,” said Alberto Mingardi, director general of the Bruno Leoni Institute, a Turin-based research center. “I don’t understand what carbon permits have to do with privatizations and why the government is throwing it into the mix. It’s also striking that there’s not even the sale of a single stake in a state-owned company.”
Italy, whose credit rating was cut one level by Standard & Poor’s on Sept. 19, is scrambling to reduce debt and stem surging borrowing costs amid contagion from Europe’s sovereign crisis. Prime Minister Silvio Berlusconi’s government last month passed 54 billion euros in austerity measures in exchange for European Central Bank purchases of the nation’s bonds on the secondary market. Greece, Spain and Portugal area also seeking to sell assets to reduce debt.
“Today kicks off a great structural reform for reducing debt and helping the country’s growth and modernization,” Finance Minister Giulio Tremonti said in an e-mailed statement after a meeting of government officials, lawmakers, bankers and executives in Rome where the documents were presented.
The Treasury also estimated that increasing the returns from state assets including stakes in companies, real estate, and concessions could lead to 9.8 billion euros in deficit reduction a year by 2020.
The meeting came less than a day after Spain announced that it had suspended plans to sell 30 percent of the state lottery company, because market conditions meant it would have to price the assets at less than book value. Greece last week cut its target for revenue from state-asset sales to 4 billion euros from 5 billion euros.
Tremonti said today’s meeting “for the first time” classified and priced the state’s holdings. The Treasury’s asset-sale plan focuses on real estate and increasing the earnings of holdings, rather than selling off stakes in traded companies, the documents showed.
The government controls 30 percent of oil company Eni SpA, 31 percent of electric company Enel SpA, 30 percent of grid company Terna SpA and 32 percent of defense contractor Finmeccanica SpA. The current combined value of the state’s stakes in those companies is 28 billion euros. Selling them would reduce Italy’s current debt level by less than 2 percentage points of gross domestic product.
“Selling state assets amounts to a temporary boost to liquidity but that won’t meaningfully impact a country’s solvency position,” Vladimir Pillonca, an economist at Societe Generale in London, said in an e-mail. “Privatizations merely front-load future receipts into a single lump-sum as a state asset is sold” and amount to “a re-profiling of the stream of revenues, which is a zero-sum game in present value terms.”
Italy’s state holdings include 425 billion euros in real-estate holdings, 132 billion euros in company stakes, infrastructure valued at 386 billion euros, available funds of 276 billion euros, 240 billion euros in credits, 176 billion euros in natural resources, cultural assets worth 37 billion euros and other items valued at 126 billion euros, according to the report by Cassa e Depositi.
Those estimates were dated to 2004 and the government didn’t give any details on plans to sell carbon permits.