Connect to share and comment

Italy moves to sell stake in post office to cut public debt

PlacardEnlarge
(Globalpost/GlobalPost)

By Giuseppe Fonte

ROME (Reuters) - Italy's cabinet approved a decree on Friday paving the way for the privatization of up to 40 percent of the post office as the government tries to bring down its huge public debt.

The sale of Poste Italiane <PSTIT.UL> will be aimed at institutional and retail investors as well as post office employees, and Economy Minister Fabrizio Saccomanni said it could raise between 4 and 4.8 billion euros ($5.47-$6.57 billion).

"I hope we can complete the sale before the summer," Saccomanni told reporters after the cabinet meeting.

He estimated that the entire post office had a value of between 10 and 12 billion euros.

According to its official documents, Enrico Letta's left-right coalition government aims to raise half a percentage point of gross domestic product per year from privatizations, roughly 7.5 billion euros ($10.26 billion).

"This year we will be able to reduce the debt for the first time after it has risen for the last six years," Letta said, adding that further privatizations would be announced soon.

Saccomanni told Reuters he hoped the post office sale would attract interest from private investors in Italy, who have traditionally favored putting their savings into bonds rather than shares.

"We expect this company to be well-received by the market also because the post office is present in every village in Italy. It's a transaction that will not remain in financial circles alone," he said in an interview on Thursday.

Letta, who recently said privatizations could raise up to 12 billion euros this year, is under pressure to take fast action to cut debt and boost the economy having made little progress on either front since he took office 9 months ago.

He is regularly criticized for a lack of urgency by Matteo Renzi, the dynamic new leader of the centre-left Democratic Party which is the mainstay of the broad ruling coalition and to which Letta also belongs.

Italy's public debt is targeted at 132.8 percent of output at the end of this year, virtually unchanged from 132.9 percent in 2013 and the second highest in the euro zone after Greece.

GROWTH IS KEY

Analysts say privatizations on the scale envisaged by the government can have no more than a marginal impact on the debt, which can only come down appreciably if Italy emerges from years of recession to achieve steady and solid economic growth.

The cabinet decree also pledged the privatization of a 49 percent stake in air traffic control operator ENAV, which Saccomanni said should raise around one billion euros. Both the post office and ENAV are currently fully state-owned.

In recent years Italy has repeatedly promised the sale of state assets but has made virtually no progress as its debt has risen steadily.

The goal of 0.5 percent of GDP per year from such sales was lowered in September from a target of 1 percent per year set by Letta's predecessor as prime minister Mario Monti.

Italy's powerful trade unions gave a mixed reaction to the plan to sell off part of the post office, which employs around 150,000 people.

Susanna Camusso, leader of the largest, left-wing CGIL union said previous privatizations had shown "this is not the way to help our economy."

The more moderate CISL union welcomed the sale, especially the plan to make shares available to employees.

At Friday's meeting the cabinet also approved a decree to encourage people to declare illegal funds held in foreign bank accounts by reducing the sanctions they faced.

Saccomanni said the hoped for increase in tax revenues would be used to increase investments and pay back debts owed by the government to private sector suppliers. ($1 = 0.7307 euros).

(additional reporting by Francesca Piscioneri, writing by Gavin Jones, editing by Alister Doyle)

http://www.globalpost.com/dispatch/news/thomson-reuters/140124/italy-moves-sell-stake-post-office-cut-public-debt