Italy pledges privatisations to show EU it can cut debt

November 21, 2013

* 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 on spending

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

By Giuseppe Fonte

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

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

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

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

Italy's public debt of around 133 percent of gross domestic product is the second highest in the euro zone after Greece. The 6 billion euros from the privatisations earmarked for debt reduction are equal to around 0.3 percent of GDP.

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

Economy Minister Fabrizio Saccomanni told reporters the privatisation plan "adds a more concrete element" to debt-cutting commitments made by Italy to the European Commission this month. He gave no precise timetable for the sell-offs.

The Commission refused to grant Italy any discretionary scope to increase public spending in investments because its original budget plan did not ensure a decline in its massive public debt.


STAKES

Saccomanni said the state would sell around 60 percent of Sace, which insures Italian exports, and 60 percent of Grandi Stazioni, 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 state holding Cassa Depositi e Prestiti (CDP) that owns part of power grid operator Terna and gas network operator Snam Rete Gas.

Letta said half the revenue from the sales would be used to pay down the public debt and the other half would used to recapitalise the CDP.

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

The surprise announcement of the privatisation plans came after the cabinet failed to agree on an emergency decree to cancel the end-year payment of a contested housing tax and other fiscal measures including sales of public buildings.

The government has been bickering for weeks over whether to cancel the installment of the housing tax called IMU, and how to find 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 sign of tensions in his fragile coalition government.

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

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