A promised privatisation drive by Italy is likely to focus on local utilities and transport firms rather than stakes in Italian blue-chip companies as it seeks to cut public borrowing without losing its most valued assets.
Under pressure to stem near-panic in the markets that sent Italian bond yields soaring, Prime Minister Silvio Berlusconi rushed through and then promised to speed up an austerity package that includes pledges to step up privatisation.
The government has not disclosed what could be sold, but Economy Minister Giulio Tremonti has said the European Central Bank had demanded large-scale privatisation of local public services - suggesting that will form the bulk of the drive.
Italian media say everything from unlisted postal services and railways to stakes in state-controlled corporate “jewels” like energy giant Eni and defence company Finmeccanica are also being examined in a bid to find funds to balance the budget by 2013.
But analysts say shedding stakes in Italian blue-chips would be an unlikely move for a country that has fiercely resisted attempts to relinquish control of assets it deems strategic, fearing they could fall in foreign hands.
Instead, municipalities that control everything from local power and gas utilities to buses and roadways are likely to be the first to be forced to cede control to private investors.
“I don't think there's any interest in putting expensive assets on the market, the privatisation will mainly affect providers of utilities and transport services controlled by municipalities,” said Marco Valli, an economist at UniCredit.
“Everything is technically possible, but the question is what is strategic and what isn't. In this phase of the political debate, I don't see any intention by the state to put corporate stakes up for sale.”
Tremonti has hinted that the government plans to come up with a system that rewards town councils that privatise their holdings, while punishing those that fail to do so.
Only a sale of water utilities will be off-limits, after Italians voters overwhelmingly voted against plans to privatise the water industry in a June referendum.
BAD TIMING
Either way, little is likely to happen without a struggle in a country that has long relied on unwieldy state bureaucracies to provide jobs for life and keep local interests satisfied.
Italy's biggest union CGIL, on the warpath over an austerity package it says unfairly targets weaker sections of society, last week said privatisation was the only topic that it was completely opposed to in a government six-point plan.
“The private sector is not always better and more efficient than the public,” CGIL leader Susanna Camusso said.
Italy last embarked on a wave of privatisations in the 1990s, raising 94.5 billion euros in net proceeds from selling off a list of stakes in companies ranging from Eni and Enel to Telecom Italia over the 1994 to 2006 period.
Since then, successive Italian governments have shown scant willingness or progress in following through on pledges to privatise state enterprises, running up against familiar issues of union opposition, strikes and disruptive local protests.
Plans to privatise Alitalia - the money-losing national carrier renowned for inefficiencies and striking staff - in 2006 set off a hysterical debate about national identity, protests and aggressive lobbying by politicians and unions.
Union opposition and criticism from Berlusconi sank a takeover by Air France , which ultimately took a minority stake when the airline was sold to Italian investors.
Poste Italiane, the state-owned postal service that is one of Italy's largest unlisted traded companies with a value of between 14-15 billion euros in 2007, has long said it is ready to go public, but plans to do so have yet to materialise.
Faced with pressure from the European Central Bank and fears it may need to be bailed out may mean that this time Italy will find it hard to put off privatisations, analysts say.
But unless desperation kicks in, there is little incentive to shed stakes in public companies like Eni or Enel right now - the stakes bring in dividend revenue, while the debt crisis has knocked their market valuations sharply lower, analysts say.
Finmeccanica shares, for example, are down 44 percent over the past year, while Eni shares are down 25 percent and Enel's stock is down 13 percent over the period.
“Selling the non-listed state assets is a problem since there's the question of valuation and timing,” said an analyst in Milan. “The listed assets like Eni and Finmeccanica would be easier to sell. But if they did it now they'd be doing it at very inconvenient prices, at a steep discount. - Reuters