Italy's Five Star Leader Vows to Help Banks Recover Assets

(Bloomberg) -- Luigi Di Maio, leader of Italy’s anti-establishment Five Star Movement, promised to make it easier for the country’s ailing banks to recover assets as he sought to win over international investors ahead of the March 4 election.

Non-performing loans “take too many years to be recovered, we’re talking about seven to 10 years,” Di Maio told Bloomberg Television in an interview in London on Wednesday. “We must shorten the time it takes to recover them by eliminating a series of Byzantine laws.”

Di Maio, 31, who was in London for a closed-doors meeting with some 30 fund managers and analysts from the U.S., Britain, France and Switzerland, said they had urged him to speed up the Italian judicial system. At the same time he pledged to tighten bank supervision, saying the Bank of Italy must be flanked by magistrates and finance police “because what happened to Italian banks must not happen anymore.”

Italy's Five Star Leader Vows to Help Banks Recover Assets

Five Star has lambasted the ruling Democratic Party, or PD, for a government rescue of four lenders in November 2015 which saw stock and subordinated debt holders wiped out. Di Maio’s party is currently leading the PD headed by former premier Matteo Renzi by some 28 percent to 22 percent according to latest polls, though a center-right coalition led by ex-premier Silvio Berlusconi is set to be the biggest bloc with 39 percent of the vote.

That result would leave continental Europe’s third-largest economy with a hung parliament that may struggle to deliver the wide-ranging economic reforms that investors and European Union officials are looking for. Di Maio sought to reassure investors that he was ready to work with other parties to seek out reasonable solutions to problems.

“We won’t leave Italy in chaos, we’ll make an appeal to other political forces on issues --less bureaucracy, lower taxes, and investment in justice and infrastructure,” he said. He ruled out forming a coalition with other parties, saying Five Star would seek outside support on specific issues if they got the chance to form a government.

“I think investors treat what he says with a lot of caution, as he frequently contradicts himself,” said Marc Ostwald, a global strategist at ADM Investor Services in London. “Right now, the focus is more on what sort of coalition emerges out of the election.”

Di Maio also ruled out an alliance with the anti-migrant, euroskeptic Northern League led by Matteo Salvini. “I think Salvini has rejected any idea of an alliance, I do so too.”

Struggling Families

Even after making reductions last year, Italian banks are still weighed down by more than 270 billion euros ($330 billion) of non-performing loans. Struggling households account for almost a fifth of that total, according to the Bank of Italy.

European authorities are pressuring lenders to sell off bad debts to free up funds for healthy companies to support growth. Di Maio said he was concerned that the cumbersome legal system in Italy would prevent banks from realizing a fair price.

“They risk being under-sold to the market because they are difficult to recover,” he said.

Di Maio said courts should work much harder with more administrative staff and magistrates and 400 “useless laws which are creating bureaucracy and judicial delays” should be abolished. “That way we would make Italy attractive, and foreign funds can come here to invest in our companies, our motorways, our public and private works.”

Plans to Govern

With Five Star’s plans for a referendum on abandoning the euro downgraded to “a last resort,” Di Maio said he believed he could negotiate a better deal for Italy with the EU because the bloc’s main powers have “weaker” governments, citing French President Emmanuel Macron.

“Germany hasn’t yet formed a government, in France traditional parties have been reduced to a minimum by Macron, and Spain and Portugal have a minority government,” he said. “Italy can bring results home.”

©2018 Bloomberg L.P.