Italy Inc.’s Takeover Spree Brings Coalition Tension to Boil

Italy’s interventionist economic policy is adding to the strains within the governing coalition and could even put Prime Minister Giuseppe Conte’s administration at risk, a senior government official said.

The government’s efforts to reshape industries including banking, highways and even stock trading with a series of multi-billion-euro acquisitions are meeting resistance in some parts of the coalition. The lack of coordination and planning is making the process unnecessarily chaotic and raises the risk of a much more serious blow up, the official said, asking not to be named discussing confidential business.

As Conte’s government deploys unprecedented amounts of financial aid to contain the impact of successive lockdowns, the administration is increasing its influence in corporate Italy with large equity stakes. That’s among factors that have irritated former Prime Minister Matteo Renzi, who now leads a minor party in the government and is threatening to pull out of the coalition unless he’s given more power.

Conte’s administration is likely to survive -- in the short term at least -- but the pressure is growing for a cabinet reshuffle early in 2021, and that could have a significant impact on the investors like Macquarie Group Ltd. and Blackstone Group Inc. who have been lined up to participate in future deals.

“Italian political risk specialists are being bombarded with queries from investors,” said Francesco Galietti, head of risk consultancy Policy Sonar. “They want to understand whether there will be a cabinet reshuffle and, if so, whose heads will roll.”

Italy Inc.’s Takeover Spree Brings Coalition Tension to Boil

Italian government bonds extended declines after the report.

Renzi has been locked in a dispute with Conte over control and management of European Union recovery funds as well as a host of other issues including how much say coalition parties get and management of lockdowns and the pandemic. Renzi has threatened to pull his small Italy Alive party out of Conte’s coalition, possibly in early January, if the premier doesn’t make concessions, which could include changes at some ministries.

To be sure, Italy is due to receive the first disbursements of more than 200 billion euros ($245 billion) in grants and loans from the European Union’s recovery fund by the middle of next year and that money will likely help to ease a lot of tensions. The challenge for Conte is navigating the intervening period.

For now, even small events are proving to be an irritant. Several spats have started over industrial policy, two people familiar with the situation said.

A parliamentary debate this week on the role of the Finance Ministry in the sale of stock-exchange manager Borsa Italiana SpA has been postponed until after the holidays in order to avoid a public fight, said the people. Finance Minister Roberto Gualtieri played a key role in pushing the sale of Borsa to Euronext NV over other bidders, prompting criticism over government meddling in a private transaction.

Bankrupt carrier Alitalia has also been a source of tension. A new state airline, christened ITA SpA, presented its business plan on Friday but the latest government bailout still has to be approved by the European Union

At other times, the strain has been over taking more of a role in industrial policy, leaving the Treasury and government constantly trying to find a middle path.

The Treasury has been accused of interfering in private company affairs in trying to offload struggling lender Banca Monte dei Paschi di Siena SpA onto UniCredit SpA. Yet, lawmakers in the Five Star Movement, the senior coalition partner, blamed the government for trying to sell Paschi instead of keeping it in government hands for longer, almost mounting a revolt last month.

There have also been tensions within the government coalition over the fate of toll highway operator Autostrade per l’Italia SpA, with the government forcing the Benetton family owners to exit the company. In each of these cases Cassa Depositi e Prestiti SpA, a state-owned lender and equity investor, was asked to take a stake sparking debate of the role of Cassa as well.

Officials from Gualtieri’s Democratic Party and Five Star have identified CDP as a critical piece of the government’s financial muscle and are getting twitchy at the prospect of choosing a new leader or confirming CEO Fabrizio Palermo’s term ends early next year. That could prove another flashpoint for the fractious administration.

©2020 Bloomberg L.P.

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