Construction to gain from public spending whoever wins

Construction to gain from public spending whoever wins
Published: 16 March 2006

Italian construction companies, such as Impregilo SpA, and cement firms Italcementi SpA and Buzzi Unicem SpA would gain from public works spending in plans proposed by both political groupings fighting Italy’s general election on April 9-10, economists and analysts said. The outgoing centre-right coalition and the centre-left opposition are both proposing infrastructure spending to boost Italy’s weak competitiveness, though via a different mix of projects, they said.

“Italy’s GDP grows less than other EU countries because Italy is not competitive. One of the reasons is lack of infrastructure. Both centre left and centre right understand this,” said ING analyst Antonio Tognoli. “In the next three to four years when the infrastructure is finished the competitive gap with other countries will improve,” he said.

The right will set aside more resources to launch public works, while the left will mobilise less resources but in agreements with local authorities it can mobilise funds more quickly, he said.

Yesterday, centre-left leader Romano Prodi in a TV debate with prime minister Silvio Berlusconi said the right has only spent 10 per cent of the Euro 250bn it earmarked for public works spending. “We have the European (transport) network among our priorities: the two big networks are the south-north route from Sicily to Berlin, and the east west from Barcelona to Budapest,” Prodi said.

Analysts said they see the left’s infrastructure plans including less major projects, such as the Euro 4bn bridge over the Straits of Messina, and Venice flood protection, promoted by Berlusconi. However, they noted how Prodi yesterday reiterated support for the high speed rail line from Turin to Lyon, which is opposed by some parts of his left coalition, such as environmental parties.

Analysts said a centre-left government is likely to cancel the Straits of Messina road/rail bridge, where an Impregilo-led consortium has already been named to carry out its construction. Cancellation of the Messina bridge project would require the government to pay a Euro 240m penalty to Impregilo, they said, though one analyst said the timing on the penalty payment is not clear.

Economists said infrastructure spending, along with other measures on the labour sector, including cuts in social security, are key to boosting Italy’s competitiveness, and both parties recognise this.