Italy To Curb The Activities Of Sovereign Wealth Funds?

The Financial Times has an interesting article on this topic today. Basically Italy's present government looks set to opposes sovereign wealth funds buying more than 5 per cent of individual Italian companies, at least that was what Franco Frattini, Italy's foreign minister, was saying yesterday.

Rome has set up a national interests committee to establish rules about the funds’ behaviour. A 5 per cent stake ceiling would make Italy one of the more restrictive markets for sovereign wealth funds among European countries. Frattini was speaking to Il Messagero, a Rome newspaper, from the United Arab Emirates where was holding talks with the Abu Dhabi Investment Authority, the emirates’ largest sovereign wealth fund. He suggested that Giulio Tremonti, Italy's finance minister, (and who has been openly hostile to sovereign wealth funds) had initiated a strategic review to examine how to “promote investments that are useful and to prevent those that are dangerous”.

The committee, according to Franco Frattini, would examine which funds adhered to the Santiago principles released this month by the International Working Group on Sovereign Wealth Funds under the auspices of the International Monetary Fund.

The issue has become topical due to the recent decision of the Libyan government to buy into Unicredit, but this does seem to be coincidental at this point, since Fratini indicated that Italy was not opposed to a 4.23 per cent stake in Unicredit, Italy’s second largest bank, taken by three official Libyan institutions last week.

Since the 24 Santiago principles stress topics like transparency, and the adoption of financial rather than political criteria for investments together with the necessity of adhere to local regulatory requirements it is perhaps odd for the external observer to find the Italian government being such a stickler, since these are mainly topics on which Italy itself scores badly in the international competitiveness rankings.