It’s easy to say “zombie companies”. What then would be the companies crushed by competition and with chronic loss accounts, kept on their feet to the sound of state loans and various subsidies. There has been a lot of talk about it for a few weeks now. Since the G30, a Washington-based international study group, has devoted one of its four annual reports to the subject in mid-December. In Italy, the publication would have passed over in silence outside the circle of insiders, if the forum of luminaries and top managers had not been chaired by Mario Draghi, flanked for the occasion by Raghuram Rajan, the former governor of the Indian Central Bank now a lecturer at the University of Chicago. What to do with these companies condemned by the market and hastily liquidated as “walking dead”? Called to guide Italy out of the shallows of a very heavy recession, now it’s up to Draghi to measure the distance that separates reality from theoretical scenarios. In a resource-hungry world such as the one that leaves the pandemic behind (hopefully soon), every effort must be directed in favor of companies capable of standing up for themselves once the crisis is over.
These are the conclusions of the G30 group, also signed by the future Italian Prime Minister. Shareable speech. And on the other hand, who would ever join the party of waste? In practice, however, when one enters the arena of political choices, the concrete application of academic recipes becomes far more complicated. It must be said that the Prime Minister is certainly not lacking in direct knowledge of the building, at least from the time when as director general of the Treasury from 1991 to 2001 he managed, among other things, the most important privatizations in the history of the Republic. Just as, as a banker, over the years at the helm of the ECB, he proved to have very clear the concrete effects of all his actions on the financial markets, up to the sensational “whatever it takes” which in the summer of 2012 avoided the sinking of the euro.
Even now, as nine years ago, Draghi takes the field to face an unprecedented emergency. In the background is the management of the more than 200 billion euros of the Recovery Fund, the lifesaver launched by Europe to avoid the sinking of the Italian system. Other choices, however, must be made in an even shorter time horizon. And in these days when political chaos is superimposed on economic depression, the fate of the so-called zombie companies is back more than ever, with thousands, perhaps even 15,000, according to the most recent estimates from the Bank of Italy. .
The pandemic has multiplied the crisis situations, but public subsidies and generalized moratoriums on loans have prevented the reckoning of bankruptcy for thousands of companies, also favored by the collapse of interest rates on debts. The system has been in some way hibernated as an extreme measure of defense against the advance of the virus and the consequent economic recession, but now that the vaccine offers concrete hope of returning to normal, the emergency aid system risks turning into a colossal waste of resources stolen from investments, research and the most vital sectors of the economy.
What to do then? Timing and methods of intervention make the difference between a soft landing and a crash that wipes out hundreds of thousands of jobs. To begin with, even Draghi, like his predecessors, will be forced to manage the dossiers of Alitalia and Monte dei Paschi, two colossal state zombies, hitherto saved from the crack to the sound of billionaire injections of public capital. The successive governments in Rome between 2017 and 2020 have granted loans and new capital for over 3 billion to Alitalia, which is still in the midst of yet another bailout. The Tuscan bank, on the other hand, also closed 2020 in the red for over 1.6 billion. The losses accumulated by the institute since 2011 now exceed 23 billion and the Treasury, the majority shareholder with a stake of 68 percent, has already burned 5 billion to avoid the crack. As is well known, the origin of all the troubles of MPS is to be found in the unfortunate acquisition of Antonveneta at the end of 2007. At the time, the governor of the Bank of Italy was Draghi, who gave the green light to a deal destined to drain the budget of the buyer on the eve of the great financial crisis that exploded in the following years.
Starting from 2011, the former Italian central banker was called to supervise the Siena institution also as president of the ECB. And now it is once again facing the colossal grain of the Monte, passed under the control of the state and in need of at least a couple of billion fresh capital to avoid the collapse. Ironically, if in the end Unicredit were the white knight called to the rescue of Siena, the rescue, with the blessing of the Draghi government, the complicated operation would be managed by the two top managers of the Milanese bank. And that is the president Pier Carlo Padoan and the managing director Andrea Orcel, both well known in the city of the Palio. The former, as Minister of Economy, in 2017 averted the crack by investing over 5 billion in public funds and then, in 2018, was elected deputy in the Siena college. Orcel, on the other hand, at the time the top manager of the investment bank Merril Lynch, between 2007 and 2008 was one of the consultants most listened to by the heads of MPS when they bought Antonveneta.
It is the past that returns, while the great credit zombie is still among us, with its load of losses and credit at risk. On Monte the new government risks big, as well as on Alitalia, also because Brussels, where Draghi also enjoys great credit, no longer seems willing to give discounts. The restart of the national airline, fresh from the umpteenth rescue, is still a hanging judgment of the European Union.
Source: L'Espresso – News, inchieste e approfondimenti Espresso by espresso.repubblica.it.
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