October 1, 2019 / 2:22 PM / 18 days ago

Italy scales back privatisation plans after dismal 2019 effort

ROME, Oct 1 (Reuters) - Italy’s ambitious privatisation programme for 2019 has proved a flop, with the new coalition government also now scaling back sell-off plans for the coming years.

Italy has the highest debt pile in the euro zone after Greece and the previous administration had pledged to raise 18 billion euros ($19.6 billion) this year from disposals to help lower the debt and reassure investors.

But the new coalition, which took office in September and combines the anti-establishment 5-Star Movement and centre-left Democratic Party (PD), signalled in its latest forecasts that sell-offs would rake in just a few million euros at most.

It also downsized future revenue expectations, saying privatisations would yield just 0.2% of gross domestic product (GDP), or 3.5 billion euros, in 2020 and the same in 2021. The Treasury had previously forecast a take of 0.3% of GDP.

The original 2019 target was the result of a frantic last minute deal with the European Commission to avoid a disciplinary procedure over Rome’s public finances, but it was never realistic, said a government source who asked not to be named.

“We hoped to make something in the last months of the year mainly through the sale of real estate, but then the old government fell and there were other priorities,” the source said.

Next year’s proceeds will include extraordinary dividends from the Bank of Italy and state-controlled companies and 850 million euros from the sale of real estate properties, said a draft of the Treasury document obtained by Reuters.

Italy has a history of wildly overestimating its likely privatisation revenues.

Between 2017-2018 Italy pocketed just 60 million euros from the sale of holdings in public companies and 1.6 billion from real estate disposals, falling far short of the original 10 billion euros target, official data showed.

The old strategy of raising money by selling assets to state holding company CDP, whose liabilities do not currently weigh on the state debt, is now considered too risky because of fears EU authorities could view CDP as part of the public administration, provoking a sharp rise in the country’s debt-to-GDP ratio.

The new government also seems unwilling to raise more money by selling its holdings in state companies to the market.

“Italy raises high dividends from big, efficient and strategic national companies which play a major role in industrial policy,” Economy ministry Roberto Gualtieri said in an interview published in early September.

The state owns stakes in several strategic companies, including 4.34% in oil major Eni, 23.59% of utility Enel and 30.2% in defence group Leonardo.

“Privatisations should not be seen as a way to make cash,” Gualtieri added.

Italy’s last major privatisation deal was the stock market listing of air traffic controller ENAV in 2016, which raised 834 million euros.

$1 = 0.9178 euros Additional reporting by Gavin Jones; Editing by Crispian Balmer and Susan Fenton

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