ROME (Reuters) – Italy is considering giving state lender Cassa Depositi e Prestiti (CDP) financial backing to fund strategic companies weakened by the novel coronavirus crisis and protect them from hostile takeovers, two sources close to the matter told Reuters.
The plan reflects Rome’s concern that an economic crisis triggered by the COVID-19 pandemic could permanently damage the industrial backbone of the country and encourage foreign players to take control of companies in trouble.
Italy, one of the countries hardest hit by the virus with more than 24,600 deaths, expects its economy to contract by around 8% this year as a result of the government’s decision to shut down most shops and factories to contain the epidemic.
Since Feb. 23, when the first restrictive measures were approved, the Milan bourse has lost almost a third of its value.
“The Treasury is looking at a scheme to provide CDP with an equity fund to invest in core companies,” one of the two sources said asking not to be named because of the sensitivity of the matter.
The government may set aside up to 40 billion euros ($43.45 billion) for the CDP’s use, the sources said, after the European Commission proposed loosening its tight rules on state aid to companies operating in the EU single market.
Under the Commission’s proposal, companies in which EU countries acquire a stake have up to two years to buy back the shares. If they fail to do so, they would be obliged to increase their stake further. The details of the plan have yet to be finalised.
A second source, also asking not to be named, said the idea was to strengthen the CDP to make it closer to the model of German state development bank KfW, which provides emergency loans to companies.
The Treasury declined to comment on this story.
The Italian plan could be included in a package worth more than 50 billion euros that Prime Minister Giuseppe Conte has promised to adopt by the end of April.
Parliament’s influential national security committee COPASIR last month asked the government to authorise the CDP to acquire stakes in strategic companies as a means of safeguarding them.
CDP already owns a 25.76% of oil giant Eni <ENI.MI>, 29.85% of power grid Terna <TRN.MI>, 71.64% of shipbuilder Fincantieri <FCT.MI> and 9.99% of former state phone monopoly Telecom Italia <TLIT.MI>.
(Additional reporting by Foo Yun Chee in Brussels; editing by Gavin Jones and Barbara Lewis)