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Italian business hit by scandal before elections

Friday, February 15, 2013 - 02:48

Feb. 15 - Italian elections are just over a week away and all sides are trying to make political capital from the string of corruption cases at defence group Finmeccanica, Monte dei Paschi bank and oil services group Saipem, which have shaken the Italian business world. Whoever wins the February 24-25 vote will face an shrinking economy, which is not expected to pull out of recession until the second half of the year. Joanna Partridge reports

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With an election just days away, a corruption scandal continues to envelop Finmeccanica. The Italian defence group has replaced its CEO Giuseppe Orsi concerning a $750 million helicopter deal with India. Orsi has been arrested and questioned by Italian police over allegations Finmeccanica paid bribes to swing the deal for the sale of 12 luxury helicopters. Orsi has resigned as chairman of the firm. It's just the latest news to rock Italy's business world - after scandals at oil service group Saipem and Monte dei Paschi bank. It comes just days before the country goes to the polls. Giuseppe Ragusa is from LUISS University. SOUNDBITE: Giuseppe Ragusa, Assistant Professor of Economics, LUISS Guido Carli University, saying (English): "Many of the scandals have to do with a lack of reform, many of the scandals of MPS are to do with the governance and the bad law that regulates the Italian banking system." All candidates are trying to make political capital from the string of corruption cases. Former Prime Minister Silvio Berlusconi, himself no stranger to legal battles, has said overzealous prosecutors risked harming Italian business. Leader of the centre-left, Pier Luigi Bersani, was ahead in the last opinion polls published before the election. He says it's the wrong moment to consider privatising more firms - including Finmeccanica. Current Prime Minister Mario Monti has been praised for implementing reforms, says Michael Metcalfe from State Street. SOUNDBITE: Michael Metcalfe, Head of Macro Strategy, State Street, saying (English): "Our starting assumption is that you get a Bersani-Monti coalition, that actually might even have workable majorities in both houses. You get that kind of outcome, you get the continuation of the reforms." The scandals have led some analysts to question the way Italy does business. James Bevan from CCLA Investment says it's important to differentiate between companies which have done things badly, and those which haven't. SOUNDBITE: James Bevan, Chief Investment Officer, CCLA Investment Management, saying (English): "We have to have a very clear focus on corporate governance, but I do think that if you look at the activities of a giant like Unicredit, you can see a very clear balance sheet, you absolutely can trace provident loss from top to bottom, you can fillet the accounts, absolutely you can see what's going on and that gives me huge confidence." Italian police made the first arrest in the Monte dei Paschi derivatives scandal on Thursday, of the former head of its finance department. The Bank of Italy has faced increasing questions over its supervision. And former Bank of Italy governor and current ECB President Mario Draghi has been drawn into the criticism. Whoever wins the Italian election won't just face calls to clean up Italy's business reputation. They'll also have to tackle the longest recession in 20 years and chronically low growth.

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Italian business hit by scandal before elections

Friday, February 15, 2013 - 02:48