In a strategic move aimed at curbing its soaring debt levels, Italy has unveiled plans to raise approximately 1% of its gross domestic product (GDP), equivalent to €21 billion ($22.2 billion), through a series of asset sales scheduled between 2024 and 2026. The announcement, outlined in the Treasury’s Economic and Financial Document (DEF), underscores Prime Minister Giorgia Meloni’s commitment to managing the country’s debt-to-GDP ratio, with the goal of bringing it down from its current level.
Italy, grappling with one of the largest debt piles in the eurozone relative to its GDP, is taking proactive steps to alleviate its fiscal pressures. The nation’s debt-to-GDP ratio is anticipated to dip to 139.6% by 2026, a marginal decrease from the current 140.2%. The newly revealed targets factor in the expected proceeds from asset disposals over the next three years, highlighting the pivotal role that these sales play in Italy’s debt management strategy.
Economy Minister Giancarlo Giorgetti, in the DEF document, provided insights into the nature of these asset sales, stating that they would primarily involve companies that are already subject to privatization commitments agreed upon with the European Commission. Notably, this includes Monte dei Paschi di Siena (MPS), a bank that underwent a bailout in 2017, incurring a cost of €5.4 billion to taxpayers.
While the Treasury is expected to engage advisors for the re-privatization process of MPS, Giorgetti tempered expectations by emphasizing that the government currently does not face any immediate cash crunch. This assertion suggests that the sale of MPS may not occur hastily but will follow a careful and deliberate process.
Additionally, Italy is poised to divest shares in companies where the Treasury holds a stake “exceeding that necessary to maintain an appropriate coherence and unity of strategic direction,” according to Giorgetti. However, specific details about these asset sales were not provided in the document.
It is worth noting that Italy’s previous administrations have a track record of falling short of their privatization targets, a trend that predates the onset of the COVID-19 pandemic. The pandemic led to an extended period of expansionary fiscal policies, which continue to influence the country’s economic outlook.
In 2018, then-Prime Minister Giuseppe Conte pledged to generate around €18 billion from asset disposals by the end of the following year, with the aim of reducing debt levels and instilling investor confidence. Regrettably, this initiative failed to yield the intended results.
Italy’s latest endeavor to raise €21 billion through asset sales signifies a renewed commitment to addressing its debt challenges. This strategic move underscores the importance of maintaining fiscal discipline and adhering to privatization commitments, particularly in the context of the country’s economic recovery and long-term financial stability.
As Italy charts its path toward managing its debt, it will be closely monitored by both domestic and international stakeholders. The success of the asset sales plan will play a pivotal role in determining the nation’s ability to rein in its debt-to-GDP ratio and secure a sustainable fiscal future.
