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Italy's new government faces two familiar business dilemmas

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Any government that emerges after Italy’s national elections will face two familiar challenges for the business community that will test its credentials.

Like many of its predecessors, the government must settle the future of lender Monte dei Paschi di Siena and ITA, the restructured national airline formerly known as Alitalia. .

If current polls are accurate, both would entail difficult political choices for the government. How to deal with the dilemma that has plagued a series of Italian governments is that the influential coalition partners will try to curb the trend of economic dirigism and, like most of their predecessors, succumb to poor management for narrow political reasons. It’s a sign of whether you can resist the temptation to interfere with your company.

“Alitalia and MPS have been unprofitable for decades, but have survived on public funding and politically-driven strategies,” said a former member of the government. It is for the nationalist right or populist left to continue to implement these vote-winning strategies that will only harm the reputation of the country among these businesses and investors.”

Had the problem been simple it would have been solved long ago, but jobs and strategic interests are at stake. And ITA and Monte dei Paschi have a particularly strong influence on Italians.

“I’m sorry, but Alitalia [rebrand]Prime Minister Mario Draghi said last year when he announced plans to privatize Italy’s chronically unprofitable airlines.

Chairman Alfredo Altavilla said last year that Alitalia’s new scaled-down version would be too small to fly on its own wings, so it was seeking a deal with a larger airline by the end of 2022. Rome is now in exclusive talks with a consortium made up of US funds Certares, Delta Air Lines and Air France-KLM to sell the airline despite political opposition in the midst of the general election campaign. went inside.

According to officials involved in the negotiations, the proposal would give Rome two board seats and a key role in corporate governance, so it would be easier for politicians to digest than a competing offer from Lufthansa. , values ​​the business at just €1 billion.

Nationalist right-wing parties have warned that this is not an issue for the caretaker government to deal with. Economic Development Minister Giancarlo Giorgetti, who was not involved in the negotiations, said the private capital-led proposal was ” We are worried about the lack of industrial partners,” he said.

“The problem with Certares’ proposal is that AirFrance and Delta Air Lines will not soon become shareholders, and ITA is too small to remain in the market on its own,” added transportation economist Andrea Juricin. rice field.

An equally politically charged business story is Monte dei Paschi di Siena, which has lost more than €30 billion to investors and taxpayers since the 2008 financial crisis. After scandals and hidden losses, Siena’s biggest employer received a government bailout in 2013 and was nationalized four years later. It’s about to embark on its seventh cash call in 14 years. It aims to raise 2.5 billion euros. The Ministry of Finance has pledged at least her €1.6 billion contribution.

Some politicians fear bank privatization will lead to mass unemployment. Maurizio Leo, a member of the Italian Brethren, told Bloomberg this week that “any decision must protect jobs and assets that are strategic for the Italian economy.”

Chief Executive Luigi Rovario, a turn-round specialist appointed by the Draghi government this year, said the bank had found several investors to raise money this week and had “huge potential”. I said yes. Despite the current difficult economic situation, Lovaglio confirmed that the bank’s pre-tax profit in 2024 is expected to be €700 million, more than double his 2021 result.

Italy’s finance ministry says the ITA and Monte dei Paschi’s planned path will avoid clashes with the European Commission over state aid policies to the EU. Overturning them at a time when the Italian economy is in need of help would unsettle commissions and investors. The ITA and MPS should be set on a long-term and financially sustainable new path that must be neutral for Italian taxpayers. Political compromise on that point can be expensive.

silvia.borrelli@ft.com

This article has been amended to clarify that Monte dei Paschi di Siena’s chief executive has indicated that multiple investors are lining up to raise capital.