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Libya crisis of 2011 leaves Italy where?

Libya crisis | Libya crisis of 2011 leaves Italy where? Anthony Harrington

Enmeshed as he is in present and pending court cases, the Italian Prime Minister Silvio Berlusconi probably doesn’t have that much time to reflect on whether or not his jolly relationship with Colonel Gaddafi – now admittedly soured beyond salvation - was ever altogether wise. What is certain is that the very substantial bet that Italy placed on Libya is in the process of coming spectacularly unglued at a point in time where the Italian economy really does not need further shocks.

The sanctions imposed by the EU, the US and various member states, have not helped. Eni, Italy’s major oil company has billions of dollars invested in Libya and was the dominant player in Libyan oil production. Unsurprisingly, it has been an outspoken opponent of sanctions which must be doing its bottom line a power of harm.

At the same time, according to Reuters, some Italian firms with Libyan shareholders are taking steps to freeze the rights of those shareholders, perhaps as a protective measure, since who exactly will end up “owning” the Libyan central bank and other national Libyan assets is currently shrouded in the fog of war. A case in point is Libya’s stake in UniCredit, one of the leading banks in Italy. By 2010 the scale of the Libyan investment in UniCredit was attracting adverse press in the Italian media. According to a story in the Globe and Mail, it was at least partially responsible for the resignation of Alessandro Profumo, the former CEO of the bank. The stake, which is now said to be about 7.5 percent, has been frozen. Libya also holds a 2% stake in Finmeccanica, one of Europe’s largest defence and aerospace companies, through the Libyan Investment Authority. But of course, the LIA holds stakes in blue chip companies across the developed world, including in the US. If the LIA ends up in the hands of whoever the UN decides are the rightful representatives of the Libyan people, that won’t be an issue, but in the meantime it is a real problem, and not just for the Italian government.

On the theme of the not so savoury relationship between Berlusconi and Gaddafi in the long years before the uprising, the web has a rich store of stories which may or may not be apocryphal. The two national leaders were dubbed the “bunga bunga” buddies, after the world’s press got hold of a story about a teenage belly dancer that Prime Minister Berlusconi allegedly intervened to free when she was charged with robbery. The Telegraph ran a story which said that the belly dancer’s 18th birthday cake would be decorated with the words, “Bunga Bunga”, a term she allegedly heard bandied about at some wild parties she witnessed at Berlusconi’s residence. Apparently Berlusconi learned the term from his good buddy Gadaffi, hence the sobriquet. The two have since fallen out hugely, with Gadaffi expressing his bitter disappointment at Italy’s failure to intervene to prevent the European initiative to implement a “no-fly zone” over Libya.

Unfortunately, while the collapse of the friendship between Gaddafi and Berlusconi matters not a jot, the collapse of Italy’s multi billion pound investment in Libya, and the uncertainties surrounding the equally huge investments by Libya in Italy matter a good deal – quite how much no one yet knows. What is certain is that Italian banks which financed the country’s Berlusconi-inspired boots-and-all investment in Gaddafi’s Libya, do not need another bad debt on their books – they have more than enough poorly performing and non-performing loans to worry about already.

Further reading on bank debt and the European sovereign debt crisis:



Tags: Gaddafi , Italian banks , Italy , Libya , Libyan war , North Africa , sanctions , Silvio Berlusconi
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