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UPDATE: Keeping watch on Italian austerity measures and water privatization

Bloomberg reports today, “The Italian Senate is set to vote tomorrow on a package of measures including asset sales and an increase in the retirement age. The Chamber of Deputies may vote the following day, and Prime Minister Silvio Berlusconi will resign ‘immediately’, Angelino Alfano, the secretary of Berlusconi’s People of Liberty party, said last night. …The budget measures presented last night were first pledged to European Union allies at a summit on Oct. 26… The measures presented to the Senate last night include a pledge to raise 15 billion euros ($20 billion) from real-estate sales over the next three years, a two-year increase in the retirement age to 67 by 2026, opening up closed professions within 12 months and the gradual reduction in government ownership of local services.”

Berlusconi had sought to raise funds from the privatization of water services, but a referendum stopped his plans. Last June, the Associated Press reported, “Berlusconi’s conservative government had passed a law mandating that the water supply be privatized by the end of 2011…and another law imposing market rules on water pricing.” Bloomberg reported on a referendum on these issues in which, “About 57 per cent of eligible Italians voted, exceeding the threshold of 50 per cent needed to make it stick. …The vote means municipalities will be barred from selling off water services to private investors as part of a plan to finance the upkeep of the nation’s water grid. Opponents of the referendum said that the government will now have to come up with 60 billion euros ($84 billion) to invest in water services.”

But it appears that the European Central Bank did not respect the referendum results – as they still called for the “full liberalisation of local public services” weeks later. In August, the European Central Bank wrote the Italian government and demanded, “A comprehensive, far-reaching and credible reform strategy, including the full liberalisation of local public services and of professional services is needed. This should apply particularly to the provision of local services through large scale privatizations.” The ECB also stated, “It is possible to intervene further in the pension system, making more stringent the eligibility criteria for seniority pensions and rapidly aligning the retirement age of women in the private sector to that established for public employees. thereby achieving savings already in 2012.”

It’s not clear what “asset sales” are now being considered, but media reports this fall suggest it won’t include water utilities. In September, the Financial Times reported, “What is on offer has still to be determined. Officials have spoken of state-owned properties and utilities owned by local authorities – excluding water companies, which Italians decided in a referendum in June should stay under public control. Sales of government-held stakes of more than 30 per cent in Enel, Italy’s largest power utility, and Eni, the oil and gas group, could raise more than €30 billion – but officials said this sensitive issue was unresolved.”

Stay tuned.