This morning I looked at the front-page of the left-leaning Italian newspaper L’Unità and realized that there were indeed some interesting and comically bizzare developments on the Italian political scene which most people in the world don’t seem to know about and that, if nothing else, might provide some insight perhaps into the extraordinary entertainment value that politics holds for people, as compared to, say, molecular biology. But I also realized that most of the “news” what not really new and that I had written about the details before in comments and so forth. So I just gathered some of these comments into one place and found that the story is easier to explain that way then trying to start from scratch. So here you are:
There is a group of very wealthy and influential financial speculators (what they call “raiders” or “vulture capitalists” in the US) who have built up a huge fortune by simply by and selling real estate. There are allegations of collusion between the various members of this new group or class according to which one of them will buy up a controlling stake in a certain real estate development after having borrowed the money from an off-shore bank which is partly owned by an offshore company in which a controlling stake is owned by another of the real estate moguls.
Here’s an example from l’Espresso: a small-time real estate investor named Danilo Coppola suddenly emerged in 2004 as one of the most powerful and richest men in Italian finance.
It all began in November 2004 when (another real estator) named Luigi Zunino sold a controlling interest in a publicly quoted real estate company called IPA to Coppola. The price was affectionate: 7 euro a stake, for a total of 185 million euro. But that’s only the beginning. From then on, Coppola and Zunino begin to exchange homes and property at extreme velocity. And at ever higher prices…
But there’s rarely ever cash involved. When possible, and it happens often, there is recourse to the barter system: real estate against real estate. Everyone is content, at the end, because the budget always shows an ever-increasing positive sign and the property can, if necessary, be used as a guaranty to the banks in order to get further loans. And if there is no “palazzo” to give in exchange, not to worry. Everything is settled in market shares. Exactly as it happened last April, according to documents from the Consob [regulatory agency] that Espresso was able to consult.
But let’s go in order. In February, the Roman real estate mogul bought shares in Banca Antonveneta for about 100 million euro. The money wasn’t his: the purchases were financed by a huge loan from BPL run by Gianpiero Fiorani. Coppola, however, has an account open with Zunino: he must pay him for two Milanese palaces which he promised to buy some months earlier. “The shares were ceded as payment of those properties”, Coppola declared to the functionaries of the Consob investigation into the occult takeover of Antonveneta. Zunino accepted and became an associate in Antonveneta alongside the friends of Fiorani. This was only one episode.
In Milan, an area called the Porta Vittoria was in play. Zunino sold a part of this property to Coppola for 118 million euro. This was quite an affair for the seller, who during the previous two years had bought that same lot for little more than 40 million. The gain was 300%. In Rome, on the other hand, the same couple recited the same play with the roles inverted: Zunino bought from Coppola four properties in the capital for 217 million. Among these, there is a pallazo that should have been valued at 90 million. For Coppola the whole thing is resolved in a handsome profit, since in January he had signed a preliminary accord to buy the same property for 72 million.
Etc, etc…
So all of this stuff is under investigation by the Consob and now the magistrates. What happened in the meantime is that a Dutch bank (ABN Amro) tried to buy up Antonveneta and a Spanish bank tried to buy up another important bank Banca Nazionale di Lavoro (BNL). The head of BPL (GianPiero Fiorani) reacted against this by buying shares to try to keep control of Antonveneta in Italy. At the same time, a group of cooperatives headed by ex-Communist members of the DS and other members of the left offered a bid to takeover BNL in order to keep out the Spanish (yes, nationalistic communists!!). The real estate moguls whom I referred to above started buying up heavily in both banks in order to act as “risk arbitrageurs”. But that’s not what they really did. According to the investigation in course, they acted in concert with Fiorani in the case of Antonveneta and with the cooperatives (aka Unipol) in the case of BNL against the interests of investors, the foreign banks and the market.
As one economist puts it, this would easily distort the results of any initial public offering (IPO), but it’s particularly damaging under the current Italian system for bank acquisitions in which anyone who wants to surpass a certain level of participation in banks must receive explicit prior authorization from the Central Back of Italy. The use of secret pacts to get around this regulation results in the attribution of control to the most dishonest, not necessarily to the most capable.
And according to the results of the investigation up to this time, that’s exactly what seems to have happened in both cases. Worst of all, of course, is that telephone intercepts have demonstrated that the governor (Antonio Fazio) of the Central Bank has extremely close and intimate ties with Gianpiero Fiorani. He is currently under investigation by the magistrature for any illegal activity but, regardless, his credibility has been irreparably damaged (along with that of Italy) in the international community and many members of Parliament, on the left and right, have been calling for his resignation.
And not only for this reason, but because it is clearly established that he delayed for as long as possible the authorization for the foreign banks to increase their quotas of participation. By doing this, he tied their hands in the competition and if it is proved that their were secret pacts, that would demonstrate that both of their [foreign banks] hands had been effectively tied.
However, even that is not the whole story, I’m afraid.
Many on the left are extremely concerned (they should have thought about this before they started joking around in the financial markets with raiders) that the removal of Fazio would just provide a great opportunity for Berlusconi to replace him with someone more attuned to the interests of the center-right coalition. On top of everything else, the governor of the central bank of Italy (unlike in any other nation on earth, I hear) is appointed for life.
Some, indeed, are claiming that Berlusconi is somehow behind the telephone intercepts of the magistrates or, more likely, behind their revelation and publication in the newspaper “Il Giornale” owned by none other than….Silvio Berlusconi.
So there are now leftists defending the corporate raiders and the probably profoundly corrupt Central Bank Governor, while many on the right are, correctly IMO, asking for his resignation. Only Francesco Rutelli, on the left, has spoken out for resignation. But Romano Prodi made a very strong statement condemning the whole phenomenon which he called “the sickness of capitalism” and has demanded serious reforms of the Italian system of regulation of financial markets and the establishment of Central bank authorization as well as a limiting of the term of the governor of the central bank to four years.
It seems that the telephone intercepts which caught Central Back governor Antonio Fazio (possibly illegally but certainly immorally) discussing favorable conditions for the takeover of the Banca Antonveneta by GianPiero Fiorani, and the corrupt group of real estate moguls/vulture capitalists who I described earlier, also intercepted a fascinating conversation between one Silvio Berlusconi and two of the aforementioned raiders in which he (Silvio) expressed his unreserved enthusiasm for the idea of a takeover of RCS (a vast holding company which owns the number one newspaper in Italy “Corriere della Sera”) by the raiders. Now, what possible interest would the Premier of Italy have in assuring the successful takeover of the most popular newspaper in Italy by a bunch of private real estate moguls with whom he obviously has intimate connections???
Signore Silvio has often expressed publicly his dissatisfaction with the editorial direction of “Il Corriere” in the past, even though it is fairly centrist.
Also, Marcello Pera (President of the Senate) has expressed his revulsion at the “giustizialismo” (“judicial activism” is the only English equivalent I can think of) of the magistrates and wants to open a Parliamentary investigation to find out who ordered the phone tappings and why. This is a perfectly legitimate question, but the honorable Senator has simultaneously dismissed the seriousness of the allegations behind and the immoral nature of the contents of those telephone intercepts.
Ok, so here’s where we stand at the moment in this unending night-time soap-opera:
Berlusconi’s Minister of the Economy, Domenico Siniscalco, resigned two days ago as the result of a combination of factors: Berlusconi’s refusal to offically express the government’s lack of confidence, “sfiducia”, in the governor of Italy’s central bank, Antonio Fazio; and the constant and unrelenting criticisms of his budget plan for the rest of the fiscal year by members of the center-right coalition.
As an aside, shortly before this (about a week ago), GianPiero Fiorani (head of Banca Popolare d’Italia or BPI) resigned his office and is now under investigation for collusion, insider trading and other forms of corruption which are actually quite normal practice in Italy.
Siniscalco has been replaced by Giulio Tremonti, ex-Minister of the Economy in the same Berlusconi government who resigned in a firestorm of controversy last year because of accusations of using fiscal legerdermain and other forms of manipulation to make the budget deficit and the overall economic situation appear much healthier than it actually was. He was also resented by Gianfranco Fini, if I remember correctly, for having favored the interests of the Northern League and the northen regions at the expense of Rome and the national interest.
As a result of the resignation of Siniscalco and of increased pressure by the UDC centrists, Berlusconi decided yesterday to offically declare his lack of confidence in Governor Fazio as head of the Central Bank of Italy. Fazio has still not resigned yet. But it seems only a matter of time.
Berlusconi has also opened up to the possibility of being replaced as the center-right’s offical candidate for President of the Counsel (Premier) in the administrative elections of April 2006. The UDC has decided to pit PierFerdinando Casini (a young, politically influential and fairly popular ex-Christian Democrat) against him. It looks like their will ultimately end up being some sort of primaries for the selection of the center-right candidate. This would automatically make GianFranco Fini a candidate by virtue of his leadership of the ex-fascist National Alliance!! Considering the respective popularity, according to recent polls, of Berlusconi (low), Cassini (high) and Fini (very high) among center-right voters, this should be a very interesting race indeed!!
