Kick-starting discussions at this national roundtable event was the observation that few subjects have lent themselves as well in Italian public debate to the vivid use of metaphors as has the scale of the country’s public debt, often described as a mountain to be climbed, a dead weight, or as tantamount to a mortgage on Italy’s future. The actual figure is indeed staggering, amounting to nearly 2 trillion euros, and exceeding 123% of GDP. Faced with such numbers, and the difficulty of even getting across what they represent, it is clear that the issue of rebalancing the country’s public finances goes beyond being a mere political saga and encroaches into the realm of the country’s longer-term economic history. It was accordingly felt that only a historical reading can unravel the significance of the long-term trends that have led the Italian state – in its broadest sense, including central government and sub-national authorities – to accumulate a stock of debt that is now costing around 90 billion euros a year in interest expenses, and which, if not “tackled”, risks stifling any prospect of the Italian economy returning to growth from the outset.
The participants noted that it is precisely with regards to the range of measures available to public decision-makers to “tackle” the problem that increasingly frequent references are being made to the option of selling off publicly-held equity and real-estate assets. Emphasis was placed, however, on the need before any such steps can be taken for an objective assessment of the extent of the assets held, an exercise which particularly in respect of real-estate assets has been hampered by longstanding difficulties in establishing a reliable database that enables the number, location and manner of use of publicly-owned properties throughout the country to be determined. These difficulties stem partly from the fact that a significant proportion of these properties – around 70% of the total – are in the hands of local authorities, yet only 53% of them have responded to the mandatory census launched by the Treasury in 2010.
Having established such due diligence as an essential prerequisite to any sale of public real-estate, the participants turned to consider what potential market might exist in Italy today for real-estate assets and their derivative financial products, especially at a time of crisis in the sector, which in the second quarter of this year recorded a decline of about 25% in sales, the worst result since 2004. It was therefore suggested that, for this reason too, however evident the desirability of such divestitures might be, they should only proceed under three conditions, namely: that they should not give rise to further recessionary effects; that they should avoid producing a segmentation of debt, which could lead markets to discern a dilution of the overall guarantees offered by the Italian state; and, above all, that any such transactions must be characterized by speed and certainty of execution. In this regard, it was stressed that time is of the essence: the country can ill afford any further delays.
Turning to the issue of the sale of equity assets, and hence, of state-held stakes in companies and public utilities, it was suggested that any comparison with the wave of privatizations that began in 1992-93 is likely to be misleading. This is due to the now generally less favorable market scenario (with large international buyers having become thinner on the ground), the cross-party resistance that has emerged in recent years towards, among other things, any option floated for reforming local public services, and finally, the inevitably necessary caution required when what is at stake is the protection of the strategic value of the enterprises concerned and the ultimate furtherance of the interests of the shareholder in question – namely, the state.
What is certain is that all the proceeds obtained from any series of sell-offs would suddenly free up billions of euros, which would then naturally need to be deployed via a judicious process of economic policy planning (and not in crisis-driven stopgap measures). In this regard, irrespective of the methods and timeframes put forward by specific proposals, such as the creation of a special-purpose “NewCo” as a vehicle for the sale (and more particularly, the optimization for sale) of such assets, the very act of embarking on such a strategy could serve as further reassurance to international partners and markets. In summing up, the participants suggested that as the country has already enshrined the balanced-budget rule in its Constitution, opening the way to the sale of public assets could provide Europe and the world with confirmation that Italy’s efforts to rebalance its books are in earnest, and that it has every intention of making the spending review exercise (understood in its broadest sense) an ongoing effort, thereby conclusively heralding the end of the era of one-off, piecemeal reforms and impromptu initiatives.