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Like the walls of biblical Jericho, the fortifications of modern Mediterranean capitalism were once all but impregnable. Now the shrill blast of trumpets is sounding below the ramparts.
Under pressure from within and without, the hierarchs of Spanish and Italian finance are set to dismantle industrial cross-shareholdings, which they have guarded for up to six decades like towers full of treasure.
Disentangled from each other, banks, insurers and non-financial companies will surely have healthier, rules-based relationships with investors, politicians and regulators. But much depends on how comprehensively the old order is broken down. Neither in Italy nor in Spain is the outlook entirely clear.
In post-1945 Italy, Enrico Cuccia, a hermit emperor of finance, amassed extensive industrial holdings for what at first was the unimpeachable cause of national economic recovery. His vehicle was Mediobanca, the Milan investment bank.
Much the same story played out in post-Franco Spain, when bankers took stakes in privatised groups such as Repsol, the oil and gas company, and Telefónica, the telecoms operator. But what the financiers also did, not by accident, was to minimise foreign influence over big business and, with a nod and a wink from the state, to weld politically connected banks, industrial groups and family-owned fortunes into phalanxes of national power.
On a tide of five years of unremitting economic crisis, change is at last coming to southern Europe. Business leaders and European regulators are stirring into action. At Mediobanca and Generali, the Trieste-based insurer, executives promise to sell once precious stakes in airports, hotels, media and telecoms. Money and expertise are to be channelled into the core activities of retail banking, investment banking and insurance. In short, Generali and Mediobanca are losing their appetite to continue as the half-hidden ringmasters of Italian big business. Both are considering selling their lossmaking interests in Telco, the holding company that has a 22.4 per cent stake in Telecom Italia, after restrictions on sales are lifted on September 28.
Disentangled from each other, banks, insurers and non-financial companies will surely have healthier, rules-based relationships with investors, politicians and regulators
Boldness seems to have limits, however. Mediobanca is not committing itself to sell its entire 13 per cent holding in Generali. Nor is it certain that UniCredit, Italy’s biggest lender by assets, the Benetton family or Silvio Berlusconi’s Fininvest group will sell their stakes in Mediobanca. Still, the old plutocratic shareholder pacts, cascades of holding companies, favours for insiders and inefficient allocation of resources are under threat. They might have passed muster in the 1960s when companies such as Fiat, an icon of postwar industrial success, flourished under Mediobanca’s aegis. But 50 years on, they will contribute no more to solving Italy’s problems than would a bill of exchange signed by Cosimo de’ Medici.
In Spain, no bank is more central to the network of cross-shareholdings than Caixabank of Barcelona, with its stakes in companies such as Repsol, Telefónica, Gas Natural, the utility, and Abertis, the infrastructure group. But Caixabank seems in no hurry to sell. Instead, the trailblazer is Bankia, a nationalised lender created in 2010 from seven cajas, or regional savings banks. European regulators demanded disposals as a condition of Bankia’s €24bn bailout a year ago. They set similar terms for Galicia-based NCG Banco, Catalunya Banc and Banco de Valencia. In other words, the pressure to shake up old ownership structures in Spain is largely external rather than, as in Italy, largely internal – though in both cases financial urgency is the main force behind change.
In principle the reform of Italian and Spanish capitalism will reduce political interference in banks
Bankia’s asset sales are already reshaping Spain’s industrial landscape. In June, the bank sold a 12 per cent stake in International Airlines Group, the company born out of a 2011 merger between British Airways and Iberia, the Spanish carrier. The €675m deal removed all direct Spanish influence over Iberia, once an emblem of the nation’s identity and global presence.
In principle the reform of Italian and Spanish capitalism will reduce political interference in banks, foster more efficient use of capital and strengthen protections for minority shareholders. By and large, this was the happy outcome in Germany when Allianz, Deutsche Bank, Dresdner Bank and Munich Re sold their industrial stakes from the late 1990s on. It was not a painless process: Dresdner became an ever weaker bank and bankruptcy engulfed companies such as Karstadt, the retailer, which had once been protected by bank shareholders. But it would be a pity if fear of similar upheavals were to block long overdue reforms of business structures and practices in Italy and Spain.
Tony Barber is the Financial Times’ Europe editor
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