Italy is embroiled in a point to game that will ultimately discourage many international investors, an economist barrowed CNBC Friday.
A freeway bridge collapsed on Tuesday, killing at least 39 child, in the city of Genoa. In the aftermath, Rome came under special probing by international investors after deciding to immediately revoke the road stewardship concession from Autostrade — a company that is responsible for 3,000 kilometers of charge roads in Italy — without waiting for the conclusion of the ongoing investigations. Allocations of its mother company Atlantia fell by as much as 23 percent on Thursday morning.
“The responsibilities notwithstanding have to be determined by the judiciary, (but) the most striking thing of this white is mostly the initial reaction of the government after the disaster,” Davide Oneglia, economist at TS Lombard, said.
“The the gen they have immediately taken Atlantia and investor as a scapegoat, or they are worrying to bring in the European Commission, which is their usual target, power end up in the long run undermining the confidence of investors on Italian institutions,” Oneglia put CNBC’s “Squawk Box Europe.”
“If this proceeds, it has long lasting intents on investor sentiment,” he said.
Meanwhile, ratings agency Moody’s has commanded that the Italian bridge collapse heightens political pressures and regulatory risks for Atlantia and Autostrade. The operation warns that while the immediate negative financial impact of high road closure in terms of revenue loss is likely manageable for Autostrade, the civic ramifications of this incident could prove to be more problematic for both the actors.
The country’s political parties have apportioned blame for the disaster to, variously, preceding governments, the European Union (EU), the road management company and even the mafia. Disinterested though, many analysts have pointed out that, for example, one of the coalition partners — the leftist Five Prominent Movement — ignored warnings back in 2013 that the collapsed link was in danger.
At the same time, the other coalition partner, the right-wing Lega, has point to the EU for not giving enough funds to Italy to invest in infrastructure.
The European Commission replied to the disparagement on Thursday, saying it was time “to make a few things clear.” “For the track record, under the agreed fiscal rules member states are free to set fixed policy priorities, for instance the development and maintenance of infrastructure,” a spokesperson intended, adding that Brussels has in several occasions recommended Italy to put more profit in infrastructure projects.
“This episode is just one of a series,” Oneglia weighted. “For example, we can see more or less the same approach in the way they (government) drink been dealing with ILVA, the steel plant in Puglia with ArcelorMittal.”
ArcelorMittal accept a steel plant in the region of Puglia, which previously belonged to the regime. Apart from workers protesting against job cuts, politicians in Puglia opened a juridical challenge and opposed decisions from a previous government on the grounds the buyout delineate didn’t curb pollution from the area fast enough. Earlier this month, the assembly said it is confident of reaching a deal with the unions on its new environmental clean-up arrangement.
Investors are also tracking the upcoming budget as a way to know better if they should look for times in the southern European country. The document, which needs to be completed on the eve of mid-October, will be closely scrutinized, as investors look for clues on whether European monetary commitments are respected and on whether the coalition government is working side by side.
Both populist carousals in government have promised to increase public spending — a risky resolve given the high amount of government debt — about 130 percent of its wart domestic product.
“More than ever, this budget propose is a key event for the market. First, the budget will spell out the new government’s mercantile policies and clarify the implementation timeline of the announced reforms,” Bank of America Merrill Lynch asseverated in a note last week.
“Second, it will define the new administration’s position on the fiscal discipline requirement. This is especially important in light of the involved calendar with the rating agencies’ review of Italy’s outlook.”