Populism pushed the Italian Government to nationalise its highways
It was a shock for the nation and the wider world when the viaduct connecting Genova’s Sampierdarena and Cornigliano neighbourhoods collapsed in 2018, killing 43 people as cars and trucks plunged onto rail tracks and streets bridge. Anger at mismanagement over italy’s infrastructures coupled with a populist government have led to the nationalisation of its highways with unfavourable terms for taxpayers, with the main reason being the Morandi bridge collapse.
The crumbling of the viaduct caused serious political turmoil: many Italians started questioning whether it was wise to privatise 50 percent of Italian highways. Autostrade, the state highway company, was privatised in 1999 when it was purchased by Atlantia, which now owns 88 per cent of its shares and made the Italian highway network its core business. After the bridge crumbled, the Government was under intense pressure to “punish” the Benetton family, Atlantia’s largest shareholder. This ultimately led to Atlantia’s concession over the Italian highway network being revoked via a state buyout to renationalise the highway network, by the government-owned economic development entity Cassa Deposito Prestiti (CDP). CDP is largely funded by Italian savers and pension savings. The populist Five Star Movement (M5S) spearheaded efforts to cancel the Autostrade concession without compensation expiring in 2044 as a way to punish Atlantia, though it wasn’t deemed legal to do so.
The Italian highway system has been a lucrative investment for Atlantia, generating €3.75 Billion in profits between 2013 and 2017. Autostrade however, has failed to maintain its highway network as well as other countries, such as Spain and Germany. Experts attribute this to the limited investments made to Autostrade’s upkeep, as well as the network’s age. Additionally, Italy has one of the most expensive toll systems in Europe; it is the European country with the highest percentage of highways with tolls (85%) while most other European countries have much cheaper annual toll stickers. up until today Autostrade has been a cash cow for Atlantia, but this is unlikely to be the case in the future. Autostrade needs to be managed effectively by the state if it is to make a profit as the new management will have much higher costs, due to lower tolls and increased (maintenance) investments. This profit would eventually pay off Autostrade’s debt, potentially making it a source of tax revenue.
In the past 10 years, Autostrade carried out maintenance in line with requests by the Italian Ministry of Transport, averaging € 900 million per year during the last 10 years. However, the company delayed investments for the modernisation of the highway network and between 2009 and 2018, Atlantia decreased its average yearly investment on Italian roads by a staggering 46 per cent. Most of the highways in Italy were built between the 1950s and the 1970s, with an average lifespan of 60 years, making them increasingly susceptible to damage and needing more repairs.
This makes it clear why Atlantia’s value rocketed up 29 per cent on the Milan Stock Exchange the day the CDP buyout was made public, an unequivocal sign that investors saw the buyout terms as beneficial for Atlantia. All things considered, Atlantia has come out relatively unscathed from the explosive situation brought by the collapse of the Morandi bridge. Though public opinion of the Benettons remains negative, the company has not paid any fines for its inability to maintain the Morandi bridge. Atlantia’s Italian highways concession was bought out regularly instead of being unilaterally revoked without compensation by the state. At this point the company still will hold its airport business, which it acquired in 2013 from Gemina, giving it control over Rome’s two airports.
On a political level, the divided nature of Italy’s multi-party governments has made matters more complicated. Since 2018 there have been two coalition governments: the first one composed by Lega Nord (Northern League) and the Five Star Movement (5SM), the second one, made up of the Demcratic Party (PD) and the 5SM. Exchanges among governing parties on how to manage the aftermath of the bridge collapse were polarising and repeatedly tested the government’s stability. This process, coupled with negotiations with Atlantia, exposed frailties and division in which 5SM pushed for an anti-establishment, punitive position, while the PD and the Lega Nord tended to make declarations against the Benettons and Atlantia, while mainly conserving the status quo.
According to Alberto Magnani, the 5SM framed this issue as a struggle between the corrupt, evil establishment (the Benetton family and their holdings) and the state. For example, the 5SM Undersecretary for Infrastructures said: “We want the Benettons to leave because they are in a delirium of omnipotence.” On the other side while Matteo Salvini, the leader of the Lega Nord, failed to broker a deal with Autostrade and repeatedly claimed the state should have pressed for more maintenance controls on highways, in 2008 he signed the “Salva-Benetton” decree which gave more favourable conditions and lowered maintenance standards for Autostrade. For this reason it seems like Lega Nord has only been capitalising on the inefficiency of Autostrade without actually negotiating good terms for the state, using strong populistic slogans like: “Only the Benettons have enriched themselves on the skin of the Genoese”. The Democratic Party repeatedly exposed itself against the Benettons, but they also pushed for a buyout with the agreed terms and the PD managed to reach an agreement with the 5SM following the embrace of the PD line by Giuseppe Conte, the Prime Minister. Policywise, this issue is complex on moral, political and financial levels; for it to have been simplified into black and white terms as in the above quote further polarised the Italian electorate without good reason.
While there are strong political reasons for a buyout to occur, Italy’s 164 per cent debt to GDP ratio does not allow for yet another chronically loss-making buyout like Alitalia or ILVA, which have cost € 4 and 1.4 billion of taxpayer’s money respectively. One could argue highways should not be for profit at all as the state should pay for them through tax revenues, but Italy’s frail finances and its obligation to keep the low yearly deficit set by EU standards takes this possibility off the table. If the state manages to strike the right balance between well priced tolls, smart investments and efficient management, Autostrade could well become profitable, bringing in state revenues. It could be argued that the Government did not frame the debate in a way that strengthened its negotiating position and the line between politics and the benefit of the small italian pensioner has remained murky throughout the negotiations.
The Autostrade deal risks stirring up once again the feeling of public money (or savers’ money in this case) being spent to prop up inefficient and costly national industries. At the same time, profitable industries have been privatised long ago, fuelling the sense of corruption, likely to fortify populist narratives. This situation is exemplified by a separate but related matter: using coronavirus as their reasoning, the government approved an extension from 2044 to 2046 to Atlantia’s remunerative concession over the airports of Rome for a meager € 36 million per annum. Last year’s profits were € 436 million. The negotiation over Atantia’s buyout has brought to light ineptitude on the government’s side and an inability to properly set regulations for Atlantia before 2018. A famous adage among the Italian left is that Italy “socialises losses and privatises profits”, and while that is not entirely true for Autostrade’s nationalisation, questions loom whether Italian savers and the Treasury will ultimately bear the brunt or not. In the meantime Atlantia has made more than €10 billion during the time it managed Italian highways. This buyout doesn’t seem to satisfy public needs and risks further encouraging populist tendencies that already dominate the Italian political scenery without generating tangible benefits.
