MNI EXCLUSIVE: Italy Democrats' Sale Plan For Post-QE Set-Back

--State Properties Could Be Sold If Unexpected Set Back For Econ 

--Operation Could Raise Up To E34 Billion, 2% of GDP 

By Silvia Marchetti

     ROME (MNI) - Italy's Democrats have a state privatisation plan in reserve

to help curb debt if growth expectations are not met in the post-QE period, a

senior government official told MNI ahead of Sunday's election.

     "It's a sort of buffer, a safety-net, a parachute we could exploit in the

case of knock-backs, if things don't go as expected and growth and inflation

targets aren't fully met," said Luigi Marattin, economic adviser to premier

Paolo Gentiloni.

     The Democrats however are confident that Italy's economy is set to further

consolidate and there will be no need to resort to the 'safety-net' sale if they

win the elections.

     "If we keep on this great path, with a 2% primary surplus, 1.5% GDP growth

over the next few years and an inflation level getting closer to 2%, we wouldn't

need to sell even one single building," noted Marattin.

     The only risks could come from a delay in reaching inflation targets at a

European-level and from undoing hard-won progress at home, halting the upward

growth trend.

     --PROPERTY SALES

     As opposed to similar operations in the past, rather than on the sale of

shares in strategic state-owned companies, the plan would focus on the disposal

of Italy's vast real estate holdings, comprised of public buildings owned by

both central and local bodies.

     According to Marattin the scheme, dubbed by Democrat leader and candidate

for premier Matteo Renzi as 'The Capricorn Plan', could raise up to E34 billion,

roughly 2% of annual GDP, over a multi-year timeframe.

     What would make this one a winning privatisation plan is its narrow scope.

     "Previous governments have attempted to focus debt reduction largely on

fire sales of state-owned company stakes -- from energy to transport -- with no

significant impact on the debt curve," explained Marattin. "Our plan is more

realistic, we believe that selling government buildings and properties is an

easier, quicker procedure ,but we keep our target low and feasible." 

     Artistic and historical properties, the back bone of Italy's tourist

industry, would not be included in the sale.

     According to Italy's state landlord, the country's public real estate

holdings comprise some 50,000 buildings worth a total E60 billion. Most are

frozen assets, unused and in need of a makeover, but with an enormous investment

potential for international buyers.

     A screening of potential buildings most suitable for sale has already been

carried-out. These properties would then be passed over to the Treasury's

investment branch to be placed on the market. The plan would also help

government boost the efficiency and appeal of many abandoned and empty buildings

by luring private operators, argued Marattin.

     --NO DEBT PANACEA

     "We know that privatisations are not key to debt reduction, but selling

some of the state's real estate would give us insurance against potential

set-backs," he said.

     "We are aware that debt cannot be cut overnight and that there's no

miraculous cure except that of supporting growth and Italy's debtor credibility

on the world stage. That's why our government program envisages a gradual but

steady decrease of public debt to 100% of GDP from current 132% over the next 10

years," said Marattin.

     In his view, it is crucial that investors, who lend Italy's Treasury some

E400 billion per year to fund public spending, continue to perceive Italy as a

reliable country able to meet its fiscal targets - even if in the long run - and

to pursue a path of structural reforms without undoing previous beneficial

measures.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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