Spirit of big government returns to Italy

Bloomberg

Almost three decades after Italy started privatising many of its biggest industrial assets, Prime Minister Giuseppe Conte is strong-arming companies across the country.
The premier is seeking to restart an economy mangled by the coronavirus pandemic and in the process is pushing to toughen vetoes on foreign investments and even in some cases nationalise business with a war chest of 209 billion euros ($250 billion) in European Union loans and grants and another 100 billion euros of extra Italian borrowing.
His plans would reverse part of the legacy of former European Central Bank President Mario Draghi, who spearheaded the selloffs of the 1990s as director general of the Italian Treasury.
“Conte is following the demands of his main coalition allies, the Five Star Movement and the Democratic Party — they both want politics to re-occupy the economy,” said Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University. “But the risk is that we scare off foreign investors at a time when we need them most.”
Conte has pushed for the creation of a single broadband network company, spurred by Five Star which started out as a web-based movement.
The government last month temporarily halted Telecom Italia SpA’s sale of a minority stake in its network and coalition parties have endorsed a road map to let the former state monopoly create a network with state-backed lender Cassa Depositi e Prestiti SpA.
Telecom Italia finally agreed to sell 37.5% of its so-called secondary network to the infrastructure unit of investment firm KKR & Co for 1.8 billion euros. Swisscom AG’s Fastweb SpA will hold 4.5% of the new network company. Telecom Italia also approved a memorandum of understanding with CDP, paving the way for a future merger of FiberCop with Open Fiber, Italy’s other grid company, and taking the first step toward setting up a single national grid.
CDP, already an investor in both Telecom Italia and Open Fiber, is often Conte’s vehicle for state intervention and has more than 40 billion euros available for acquisitions. It is set to buy a stake in the new broadband company and has asked for guarantees on governance. The government will draw on EU recovery funds to expand the ultra-fast network, Finance Minister Roberto Gualtieri said.
The state lender’s foray into the telecoms market “isn’t the new Italian road to ‘mixed capitalism,’” CDP chief Fabrizio Palermo said in an interview published in la Repubblica. “This is ‘patient capitalism,’ which invests where development factors come into play.”