I’ll explain why Draghi will also save Alitalia with public money

Draghi will also save Alitalia with public money

Will Draghi save Alitalia with public money? This is the question that arises when faced with yet another rescue plan on the horizon for the state airline.
Many expect a sign of discontinuity from Draghi. Exhausted by the bleeding of billions that Aitalia causes to the state coffers.

But if a downsizing of the workforce is plausible, its privatization is not at all.
Those who expect this fall into error and we explain why.

Can Alitalia be completely privatized?

A few days ago I had a sparkling exchange on this issue with a dear friend who sits among the proponents of Alitalia's privatization.
I will use this comparison I had on a social network to draw some indications that we will probably see implemented in Draghi's plan.

The new president of the Council of Ministers finds himself between the European anvil that asks him for an epochal turning point on the issue and the hammer of government commitments that require him to save jobs.
Not only because of the effects of the Chinese plague, good Mario has every interest in taking the Alitalia case as far as possible.
Perhaps it will be able to make some adjustments or a reshaping of the current financial or corporate model, but it is not excluded that the monolith will once again emerge unscathed.

This is because, quite simply, Alitalia cannot be completely privatized.

To understand it, it is sufficient to understand what are the two factors that will influence the writing of the umpteenth page of this never ending story.

Has Alitalia really reached sunset?
Has Alitalia really reached sunset?

The political question: questions of consensus

The first factor is determined by the political question.
Mario Draghi is at the head of a half-political government. His method for the formation of the new executive was based on the now famous Cencelli method .

The goal is simple: to please everyone in order to get to the Quirinale and guarantee further adhesion of Italy to European integration.

Cencelli Manual

Draghi finds himself having to manage, listen, hear, the concensus. Consensus in the first place of the government parties and, in the second place, that accumulated in the polls.

Mario Draghi polls

What do you do when double consent must be maintained? Jobs and prebends are saved.
All this because on the one hand it is bad to pass for those who make voters stay at home with family and on the other because managers usually belong to some party or current, and therefore this would lead to a sgarro for someone who will then have to contribute to the election. of the next head of state.

Alitalia is a strategic issue

But what will affect the matter most of all is the strategic weight that Alitalia has for the country.
And to those who complain about the inefficiency of the state airline, we reply that this too is not a good principle for decreeing its sale.
We have already seen it applied with Autostrade, Telecom (formerly SIP), IRI, etc. With what results has it become history, both for what concerns the public accounts, and, above all, for the tariffs that, with the exception of the telephone sector (thanks to the considerable price reductions, determined by technological progress) we know well.
Once yes, they were all jewels.
It was the public subsidiaries that pulled us out of the rubble and they were really jewels.
Then they became something else.
But there are those who preferred to sell them off rather than have them administered properly. This is the real ball and chain: management mixed with the problem of nepotism.

Years ago a Striscia report showed how the salaries of the managers and their poor management skills were causing Alitalia's accounts to fail.

Wanting to be ironic about privatizations, we would say that the advantageous aspect of privatizations is that today we have a more efficient state, we have maintained high employment and that we have eliminated public debt.
Luckily, otherwise we would have been fools.

My friend replies that " The beauty is that airlines can blissfully fail abroad ".

So much so that in the USA it happened for seven companies .
The problem is that they weren't state-owned companies.

It is true that AIR France and Lufthansa are also on their knees due to the side effects of the Chinese plague, but their states are helping them.

Alitalia vs. the others
Would Germany save Lufthansa with public money?

Okay, but it's not fair to mix a covid crisis with a parasitic crisis, my friend makes me understand.

Well, this has only an ethical value. From a strategic point of view, one crisis is as good as another and must be addressed for the long-term effects that this would have on the economy. Otherwise it is equivalent to being on the side of those who justify the suspension of public budget constraints to tackle the covid but not to fight unemployment!

So what's the point?


If you don't care about economics, economics is about you - Mario Draghi

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The state bailouts by Germany, France and the frugal

Then the question is resolved by analyzing the state bailouts of the recent past.

The real solutions would take time and pulse, for example reforming the ruling class (but you have to start by eliminating school defects starting from kindergarten), cutting management salaries and eradicating nepotism and corruption.

Neither Stalin nor Kim succeeded in their home, let alone us.

Now between the utopia of working so that one day future Menichella, Beneduce and Mattei will be born or selling off everything and burping, I understand what the temptation is.
I don't blame this instinct.
Only the spirit should be that of the best possible aspirations. At least ideally.

Then? So we have to be realistic and concrete.

In our previous article we told how the bail-out practice took place to save European banks with public money before the new stress tests were introduced and consequently the bail-in , i.e. the bail-out of Italian banks at the expense of savers.

In this piece we summarized what was written on the book of Easy Explained Economics , so, without you having to buy it, you can understand this mechanism simply by reading the article.

Bail-in and bail-out

Here, this unequivocally demonstrates that if the airlines had been in crisis even before the arrival of the Chinese plague, they would have been saved anyway.
Because such an event does not depend on the causes of a crisis, but on the importance of the sector in question for the state!

The bailout of banks with public or private money. Page 285 of the book of economics explained easy
The bailout of banks with public or private money. Page 285 of the book of economics explained easy

Alitalia is still a strategic asset for the state

Worse happened in the affair of Fincantieri's entry into the French port sector. Here the reality shows us that abroad, although in the Europe of the single market, there is state intervention even in the absence of any crisis.
It is enough for the interests to intervene.

Macron stops at Fincantieri

Source: Il Sole 24 Ore


Ultimately, the concept of TOO BIG TO FAIL (too big to fail) outside the USA (or at least in Europe) will always be reflected in reality, that is: cases like Lehman Brothers could possibly occur for cases of companies or other situations deemed "expendable", as happened for the savings of the shareholders of the two Veneto, but not for the companies or sectors considered strategic by the state.

Moreover, if this were not the case, the Euro (saved by Draghi) would not have existed for at least 6 years. This is why i introduced the quantitative easing bazooka which was not at all foreseen by the European agreements.
And before that we would have celebrated the Deutsche Bank funeral; the most rotten and deceased bank on the planet.

Therefore Alitalia will continue to be saved as long as it maintains the status of a strategic asset.

Easy Explained Economy does not make it a matter of opinion, ethics or interest. It does not judge the work of Alitalia employees. Here he makes it a simple matter of being more realistic than the King.

The rules are made and unraveled as it suits them best, or better, as they are best suited to changes in reality and the interests at stake.
Our problem is that in Europe, those who are driving it are continental powers that pursue their own interests.
And our political class is what it is …


If you don't care about economics, economics is about you - Mario Draghi

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The article I'll explain why Draghi will also save Alitalia with public money comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/vi-spiego-perche-anche-draghi-salvera-alitalia-con-soldi-pubblici/ on Thu, 04 Mar 2021 08:27:22 +0000.