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Privatization, Crisis, and the Transformation of Cassa Depositi e Prestiti
Abstract
This chapter explores the transformation of Cassa Depositi e Prestiti (CDP) from a small Directorate-General within the Treasury to a full-fledged National Development Bank charged with channelling credit toward small firms and Mid-Caps, financing infrastructural projects, providing patient liquidity to the treasury and equity investment to strategic firms. After a brief historical excursus, the chapter focuses in particular on two watershed moments in the history of CDP: the privatization in 2003 and the sovereign debt crisis. Both junctures paved the way to the substantial expansion and diversification of CDP’s activities in support of the Italian economy. Italy provides an ideal vantage point to explore the relationship between NDBs and their sovereigns due to the unique mismatch between the financial strength of CDP, funded by postal savings, and the financial needs of the cash-stripped Italian sovereign, burdened by an enormous public debt.
... Existing studies highlight the role of NDBs in filling this financing gap by stepping up their export-credit capacity. However, NDBs are restricted in their activity by the obligation to abide by state aid regulations (Bulfone and Di Carlo 2021;Mertens et al. 2021). Consequently, strategic firms were encouraged to embrace market-based financing strategies such as multiple listings (Clifton et al. 2011, 771-773). ...
The Great Recession renewed calls for a return of state activism in support of the European economy. The widespread nationalizations of ailing companies and the growing activism of national development banks led many to celebrate the re-appearance of industrial policy. Despite this reappraisal, however, comparative political economy (CPE) contributions to the study of industrial policy are still scarce. This review article critically overviews the existing literature linking CPE and industrial policy meeting three goals. First, to trace the evolution of the goals, protagonists and policy instruments of industrial policy in the European Union (EU) since the post-war period. Second, to provide a periodization of the evolution of industrial policy based on the distinction between the inward-looking forms of state intervention prevalent until the late 1970s and the open-market industrial policy of later decades. Third, to outline future research pathways based on the integration between CPE, heterodox economics and economic geography.
Relying on insights from the comparative capitalism debate this paper compares the industrial policy strategies implemented by the Italian and Spanish governments to favor the internationalization of domestic electricity and telecommunications incumbents. It is shown how the cross-sectoral and cross-country variation in the outcome of their industrial policy efforts – that is, successful or unsuccessful internationalization – is explained by the reciprocal power relationship between governments and domestic large shareholders (“blockholders”). Successful internationalization is conditional on the availability of two power resources the government can use to influence blockholders’ behavior: ownership power and regulatory power. When these resources were available, governments were able to impose a stable ownership structure on national champions, leading to successful internationalization. When they were not available, ownership instability led to failure. The findings presented here contribute to the debate on new forms of state involvement in the economy in the neoliberal era.
The role of NPBIs in the implementation of the EU budget has grown in importance over time. Despite that, there is little information on how exactly NPBIs intervene in the design, management and implementation of EU FIs and guarantees.
This study explores in detail NPBIs’ past experiences in the roll-out and implementation of EU market-based instruments. The main source of information is an on-line survey conducted between December 2017 to February 2018 to a representative sample of European NPBIs.
On the basis of the results of the survey, and some in-depth interviews with EU and national experts, the study assesses the Commission’s proposals concerning the next generation of FIs and budgetary guarantees and formulates some recommendations on how to improve the role of NPBIs in the next MFF.
Contributing to the debate on the state's role in helping domestic firms to internationalize, this paper compares the divergent performance of the Italian and Spanish telecommunications incumbents Telefonica and Telecom Italia (TI). Telefonica has grown since the early 1990s to become one of the largest telecommunications utilities worldwide, while TI is now a small firm controlled by the French media group Vivendi. This divergence occurred even though both the Italian and Spanish government implemented an activist industrial policy strategy aimed at favouring the internationalisation of, respectively, TI and Telefonica. The paper shows how these contrasting outcomes can be traced to the different regulatory power relationship between the state and domestic blockholders in the two countries. The findings shed light on the factors that lie behind the successful internationalisation of inward-looking firms active in regulated sectors.
This article explains the impact of liberalizing legal reforms on corporate practices. The cross-country comparison of five corporate governance indicators shows how the implementation of a similar set of liberalizing reforms had a puzzlingly divergent impact in France, Italy and Spain. An actor-centred coalitional approach is applied to demonstrate how such divergence was created by the same dynamic: the exploitation of liberalization by domestic corporate insiders. Leveraging their unparalleled power resources, corporate insiders mediate the effects of liberalizing legal reforms on corporate outcomes. Hence, liberalization, rather than favouring outsiders’ contention, further strengthened the insider nature of French, Italian and Spanish corporate governance. The validity of these claims is tested by looking at the impact of the Eurozone crisis on the power of corporate insiders.
European countries’ political‐economic policies, practices, and discourses have changed profoundly in response to Europeanization, even more so than in response to globalization, but they have not converged. National policies may now be more similar, especially where they follow from common European policies, but they are not the same. National practices, although moving in the same general direction toward greater market orientation continue to be distinguishable into not just one or even two but three varieties of capitalism. And national discourses that generate and legitimize changes in policies and practices not only remain distinct, they matter. The book spans fields and combines theoretical insights with innovative methods to show that European countries have followed very different pathways of economic adjustment, and will continue to do so into the future. Of the three cases used in illustration, France is shown to have undergone the greatest amount of adjustment, having largely abandoned its interventionist policies and transformed its state‐led capitalism in response to both globalization and Europeanization, but without the benefits of a fully legitimizing discourse. Britain, by contrast, adjusted mainly in response to globalization while anticipating many of the pressures of Europeanization, and came up with a transformative discourse that largely legitimized its neo‐liberal policies and its move toward greater market capitalism. Germany, finally, felt global and European pressures latest, not until the 1990s, at which point it slowly began to alter its social market policies and to make its managed capitalism more competitive, also without the benefits of a fully legitimizing discourse.
This case study analyses how the Italian 'core executive' operated in the negotiation of the Maastricht Treaty provisions on Economic and Monetary Union. The record of the Italian negotiators on EMU is examined in the framework of a 'two-level' bargaining game. It argues that policy was largely driven by a small technocratic elite, with limited ministerial involvement. The overarching foreign policy imperatives were to maintain Italian participation at the heart of the European integration process and to reduce the asymmetry of monetary power with Germany. Domestically, however, the technocratic elite shared a belief in the need for externally-imposed economic discipline (a vincolo esterno - external constraint), to overcome the problems posed by the partitocrazia - the domination of government by parties. EMU was used to effect domestic reform by redistributing power. In the process they unleashed powerful transformative effects on the Italian state. The domestic effects of EMU were thus much more far-reaching than the Italian impact at the European level on the final EMU agreement.
This book looks at the banking and finance industries in Italy and how these industries contribute to the Italian economy. Could these industries be the solution to the contradiction in which the country’s economy has been caught for several years: it is better governed than it has been in the past, but is not growing as much as it could. The book looks at how this solution might be achieved and what factors will govern the contribution of the banking and finance industries.
After the crisis started in 2008 Italy’s industry has lost close to one quarter of its industrial production. The article documents the decline of Italy’s industry and technology, setting it in the context of the demise of post-war government intervention and of the current European debate on industrial policies. An analysis of the current tools used in Italy’s industrial and innovation policy is carried out, showing its ‘horizontal’ approach, limited resources and fragmented measures. Current initiatives appear unable to support a revival of production and investment and to reduce Italy’s gap in technological activities. The conclusions argue that the possibility to reconstruct the country’s production capacity largely depends on the development of a new industrial policy combining Italian and European initiatives.
The history of the bank privatisation process in Italy is short and not yet fully completed.
The improbable should not be mistaken for the impossible.1 By mid-1996 the probabilities assigned to Italy’s admission to the third stage of EMU were nil, or slim at best. The country did not fulfill any of the entry conditions. The general government deficit exceeded by some four points the Maastricht standard. The fact that in June 1996 a new government led by Mr Prodi set for 1997 a deficit target far above the required 3 per cent was interpreted as the official recognition that admission was out of reach.
Major institutional reforms that have introduced economic regulation in
Europe and elsewhere appear to have ended traditional industrial policies
of favouring selected national champion suppliers. Privatisation, the delegation
of powers over mergers and acquisitions to the EU and independent
competition authorities, new rules to ensure competition and prohibit
state support to favoured companies and the end of planning, all appear
to have led to a regulatory state. However, the article argues that regulatory
reforms have in fact provided additional or alternative instruments for
policy makers to favour European or international champion firms. The
article analyses the different institutional reforms to show how they have
provided instruments for policy makers to construct larger Europeanised
and internationalised champion firms, shape markets through mergers
and acquisitions, aid selected firms in liberalised markets, and to plan
policies in ways that privilege chosen firms. It concludes that regulatory
institutions are compatible with new forms industrial policy.
Sound corporate governance is essential for a well-functioning banking system and the integrity of financial markets. The paper discusses the corporate governance of Italian banks, its regulatory framework, and the specific challenges arising from the role played by foundations and large cooperatives. Although Italian banks have recently made progress in improving their corporate governance, more needs to be done. In this regard, further improvements should include: (i) strengthening further the existing banking regulations through stricter fit-and-proper rules for directors and controlling shareholders; (ii) implementing the new related party lending regulation with tightened definitions; (iii) strengthening oversight of foundations when they are the controlling shareholders in banks; and (iv) facilitating the transformation of large cooperatives into joint stock companies.
Keywords: Southern Italy; Regional Development; Convergence; State Intervention; industrialization. JEL Classification: N14; N24; N44; N94.
Recent studies suggest that the only convergence of Southern Italy towards the Italian and European average, from 1951 to 1973, was due to the massive regional policy pursued through the State-owned agency "Cassa per il Mezzogiorno" (1950-1984). From the oil shocks onwards, however, public intervention in Southern Italy deteriorated and was no longer effective in promoting convergence. In spite of the obvious importance of these issues, at the present stage of research they are only hypotheses. In order to test their validity, this paper analyses the balance sheets of the Cassa per il Mezzogiorno, never studied before: through them, we reconstruct for the first time the activities of the Cassa per il Mezzogiorno in favour of the economic development of Southern Italy at the regional level. After re-assessing the role of the Cassa in light of the recent advancements in economic and business history, with the help of a detailed quantitative picture and some qualitative elements, we analyse the specific contribution of the Cassa to the convergence of Southern Italy.
I analyse the nature of the design failures of the Eurozone. I argue first that the endogenous dynamics of booms and busts that are endemic in capitalism continued to work at the national level in the Eurozone and that the monetary union in no way disciplined these into a union-wide dynamics. On the contrary the monetary union probably exacerbated these national booms and busts. Second, the existing stabilizers that existed at the national level prior to the start of the union were stripped away from the member-states without being transposed at the monetary union level. This left the member states “naked” and fragile, unable to deal with the coming national disturbances. I study the way these failures can be overcome. This leads me to stress the role of the ECB as a lender of last resort and the need to make macroeconomic policies more symmetric so as to avoid a deflationary bias in the Eurozone. I conclude with some thoughts on political unification.
Fra i grandi paesi europei, l'Italia è quello in cui le differenze territoriali risultano più marcate e persistenti. Il volume ricostruisce l'evoluzione dei divari regionali dall'Unità ai nostri giorni e analizza le politiche pubbliche che, nelle diverse fasi storiche, sono state attuate per colmarli. Dallo studio emergono due interessanti elementi di novità. Innanzi tutto, la definizione e la misura dei divari non riguardano solo il reddito, ma anche lo sviluppo umano e la qualità complessiva della vita. Vengono perciò presentate nuove stime regionali non solo del reddito pro capite ma anche della speranza di vita, dell'istruzione e quindi dell'"indice di sviluppo umano", per il periodo che va dalla fine dell'Ottocento ad oggi. In secondo luogo, viene adottato un approccio comparato che non si limita all'Italia meridionale ma si rivolge anche a quelle aree del Centro-Nord che in alcune fasi sono state oggetto di una legislazione di sostegno, e che spesso si sono rese protagoniste di straordinari percorsi di sviluppo.
Indice: Introduzione. - I. Il dibattito sullo sviluppo. - II. Le politiche pubbliche. - III. Misurare i divari. - IV. Strade diverse. - Riflessioni conclusive. - Riferimenti bibliografici. - Indice dei nomi e delle regioni.
Economic globalization and European integration present major challenges to the regulatory systems of European states. However, notwithstanding the severity of these pressures, there is clear evidence that their impact is significantly mediated by the specific political and structural characteristics of individual states. What is less apparent is precisely which characteristics matter and how much room for manoeuvre states enjoy. Frequently, their role is conceptualized in terms of a choice between liberal accommodation or conservative protectionism. However, an analysis of bank reform in Italy, and the role of the Bank of Italy in particular, suggests that an appreciation of the enduring regulatory capabilities of states is necessary if the complex pattern of reform outcomes is to be understood.
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