Italy plans $70 billion sell-off

Issue 

By Catherine Brown

"The biggest state sell-off" in the European Community is the description, by EC financiers, of the Italian government's privatisation plans. The emergency economic package announced last month includes austerity measures which the Giuliano Amato government hopes will bring Italy into line with the Maastricht Treaty's convergence criteria.

While Italy won't be the only country forced into adopting austerity measures, the lira has the reputation of being the sickest currency in Europe.

Italy's credit rating with the Japanese JBRI has been reduced from AAA to AA. It was already the only G7 country without a AAA credit rating with Moody, the US credit-rating agency.

Amato's emergency budget, announced on July 11, included:

  • an attack on the so-called golden pension scheme, long recognised as the best in Europe, raising women's retirement age from 55 to 65 and men's from 60 to 65. Health eligibility will be tightened. The minimum contribution period will be raised from 15 to 20 years.

  • a freeze in public sector employment.

  • increases in various taxes and licences.

  • a once-off tax on bank and post office deposits.

It is estimated the increase in taxes will be A$135 per month for each household.

Earmarked for privatisation are: IRI, the main state holding company; ENI, the state oil concern; ENEL, the state electricity authority; and INA, the insurance institute — around A$70 billion in assets.

The sell-offs, the government says, will take three years. Amato describes his government's approach as "the market wherever possible, the state whenever necessary".

With the state employing over 15% of non-agricultural labour, jobs will be the real casualty of privatisation. Economists argue that "excess" staff in the public service is as high as 20%. Even without the state ownership shake-up, the union confederation CGIL states, 200,000 jobs are at risk.

The ruthlessness of Amato's initiatives has been welcomed by the European finance sector. But the question being asked is: can he deliver?

The April elections have been described as an "earthquake", bringing a spectacular decline — less than 30% of the vote — of the Christian Democratic Party, the dominant force in Italian politics since 1945.

Much of the CD's loss went to the right. Many employers had criticised the Andreotti government's inability to deal with the economic and political problems, and some small and medium entrepreneurs in the north turned to the xenophobic Lombard League.

The left vote dropped overall as divisions emerged between the Party of Democratic Socialism (the former Communist Party) and the militant new Party of Communist Refoundation. With a vote between 6 and 11%, the PCR has a certain popular influence.

It took six weeks after the elections for a government to be formed. No postwar government (and there have been more than 50) has relied on so fragile a coalition — a 16-seat majority. Amato, the former deputy head of the Socialist Party, heads a coalition of the SP, the CD, the Social Democrats and the Liberals.

The "clientelism" of the political system has increasingly come under criticism by big business. Italy has the biggest public sector in Europe, and appointment to management is on the basis of political patronage. A corruption scandal in Milan involving key Socialist Party members and the government's inability to fight organised crime have further discredited the government.

Amato describes his government as a "transition" from a corporatist state and patronage politics to a modern member of the EC. But potential European investors are looking for changes to the political system away from proportional representation to guarantee a more stable government.

Such a project is fraught with conflicts and manoeuvres among the four coalition partners. The SP is reportedly sounding out a potential alliance with the PDS, in the hope of being a major player in any two party system.

Popular response to the government's austerity budget is uneven. A token protest by the three main union confederations was organised in Rome.

Barely two weeks later, on August 3, under press headlines "An End to Italy's Wage Hikes", the government announced the abolition of the scala mobile, the wage indexation system which has set inflation-linked rises since 1945. This accord between the unions, the employers and the government will not be finalised till September. Already, big business has welcomed it as a "historic" achievement. The changes so far are just the beginning of Amato's austerity plans. Italians have been warned the 1993 budget will be " a lot tougher".

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