Italy pledges privatisations to show EU it can cut debt

Reuters

* Sell-offs aim to raise 10-12 bln euros next year

* Sell-offs will lower Italian debt by less than 0.3 pct

* Letta says hopes EU will give Italy more leeway onspending

* Cabinet puts off decree to scrap housing tax (Adds details, background)

By Giuseppe Fonte

ROME, Nov 21 (Reuters) - Italy will sell stakes in publicentities including oil and gas company Eni to raise upto 12 billion euros next year ($16.16 billion) and help cutpublic debt, Prime Minister Enrico Letta said on Thursday.

Holdings to be sold include STMicroelectronics,shipbuilder Fincantieri, air traffic controller Enav and 3percent of Eni, though Italy will keep its overall stake in theenergy company above 30 percent, Letta said.

He told reporters after a cabinet meeting that half of theamount raised from the sales would be used to reduce Italy'sdebt in 2014, and added that he hoped this would help win moreleeway from the European Commission on investments.

This is "a first step to not just to keep the 2014 deficitunder control, but also to reduce total public debt for thefirst time in five years," Letta said.

Italy's public debt of around 133 percent of gross domesticproduct is the second highest in the euro zone after Greece. The6 billion euros from the privatisations earmarked for debtreduction are equal to around 0.3 percent of GDP.

Italy has been promising to launch a programme ofprivatisations and other asset sales for several years, butsuccessive governments failed to get it off the ground.

Economy Minister Fabrizio Saccomanni told reporters theprivatisation plan "adds a more concrete element" todebt-cutting commitments made by Italy to the EuropeanCommission this month. He gave no precise timetable for thesell-offs.

The Commission refused to grant Italy any discretionaryscope to increase public spending in investments because itsoriginal budget plan did not ensure a decline in its massivepublic debt.

STAKES

Saccomanni said the state would sell around 60 percent ofSace, which insures Italian exports, and 60 percent of GrandiStazioni, which runs retail areas in Italy's railway stations.

He said it would sell off about 40 percent of Fincantieri,40 percent of Enav and 50 percent of CDP Reti, an arm of stateholding Cassa Depositi e Prestiti (CDP) that owns part of powergrid operator Terna and gas network operator Snam Rete Gas.

Letta said half the revenue from the sales would be used topay down the public debt and the other half would used torecapitalise the CDP.

The sale of the stake in Eni, worth some 2 billion euros,will be conducted through a buy-back operation by the companywhich will ensure the state's holding does not fall below itscurrent level of 30 percent, Saccomanni said.

The surprise announcement of the privatisation plans cameafter the cabinet failed to agree on an emergency decree tocancel the end-year payment of a contested housing tax and otherfiscal measures including sales of public buildings.

The government has been bickering for weeks over whether tocancel the installment of the housing tax called IMU, and how tofind the 2.4 billion euros which it would cost.

This was slated as the main item on the cabinet's agenda,but Letta denied that the inconclusive outcome was a fresh signof tensions in his fragile coalition government.

He confirmed that the IMU installment would not be paid, inline with a coalition agreement, and said the decree on this andother fiscal measures would be approved by the cabinet onTuesday next week.

($1 = 0.7428 euros) (Reporting by Giuseppe Fonte, writing by Gavin Jones and NaomiO'Leary Editing by Jeremy Gaunt)

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