CIA-Connected Private Equity to Buy Italy’s Critical Communications Infrastructure

The New York-based private equity firm KKR, which includes former CIA director David Petraeus as a partner, has a controversial agreement to buy the fixed-line network of Telecom Italia (TIM).

The Italian government, led by purported nationalist prime minister Giorgia Meloni, helped ram through the deal by agreeing to pitch in 2.2 billion euros to take a 20 percent stake. Rome, always under pressure from the EU for its debt,  will issue sovereign bonds to fund its investment. There was not a shareholder vote prior to the sale agreement. French media conglomerate Vivendi, which owns a 24 percent stake in TIM, says it will sue to block the deal.

While the company is privately owned, Meloni’s government and the administration of her predecessor Mario Draghi (the former vice chairman and managing director of Goldman Sachs International and ECB president) both played key roles in engineering a deal that would allow the state to maintain influence. Italy is set to get a 20% stake in the network unit as part of the deal, and Meloni has set aside up to €2.5 billion to invest in the company.

The deal represents another step in the wholesale takeover of Italy and Europe by the US, as well as a continuation of the sell-off of Italy that began thirty years ago as the country prepared to enter the EU.

TIM’s landline network covers nearly 90 percent of Italy’s households and its fiber cable stretches more than 14 million miles (23 million kilometers) around the country. The deal would make it the first telecoms group in a major European country to part ways with its landline grid. The deal is being applauded by English-speaking business news media. No doubt there is now hope that many European countries will open up their telecom infrastructure for US acquisitions.

There is now hope for more merger and acquisition activity in the Italian telecom sector. According to Bloomberg, “the deal could now pave the way for other M&A opportunities in the Italian telecommunications sector. Italy has one of the world’s most competitive telecoms markets, with monthly subscriptions for full-fiber landline services, which usually include unlimited Internet, priced as low as €20 to €25, about a quarter of what most US consumers pay.”

The stated reason for TIM’s current sell off of assets is because its massive debt (26 billion euros net, but )the story of TIM embodies the strip mining of Italian assets – a fire sale that began three decades ago when Italy came under EU control. Telecom Italia was privatized at that time, and that a straight line can be drawn from that ill-fated decision to today. As journalist Marco Palombi writes at Il Fatto Quotidiano (translation):

However, this disaster began thirty years ago when “the mother of all privatizations” was deemed necessary for Italy to respect the parameters of the Maastricht Treaty. There was no industrial plan, just the requirement to raise cash. It is the first of many financial choices that destroyed an industrial giant.

TIM in its current form was born between 1994 and 1997 from the merger of Società Italiana per l’Esercizio Telefonico and Società Finanziaria Telefonica (state-owned telecommunications companies). According to the recent “Illusioni Perdute” by Marco Onado and Pietro Modiano (Il Mulino), in 1998 TIM was “fourth in Italy in terms of turnover and the first in terms of added value, it had high profitability (the profit exceeded 11 percent of turnover), and it had practically no debts”. Additionally, TIM employed 120,000 people compared to 40,000 today and had “a strong innovative capacity” boosted by cutting-edge subsidiaries such as the Torino-based Centro Studi e Laboratori Telecomunicazioni.

Bigger picture, it is part of ongoing troubling trends for Italy, which continues to be ransacked by Brussels and the US – and increasingly by spook-connected American ventures.

The CIA-linked US company Palantir has also established a beachhead in Italy’s National Health Service. The company develops software that collects and churns through massive amounts of data  (fingerprints, phone records, known connections, satellite imagery, bank records, and social media connections, facial recognition, etc.).

Palantir and Gemelli Generator Real World Data, announced in September a partnership to “introduce digital medicine research solutions that harness the power of artificial intelligence (AI) to enhance patient care and health outcomes.”

Gemelli is the second-largest hospital in Italy, one of the largest private hospitals in Europe, and also provides free medical assistance as part of the Italian national health system. According to NS Healthcare:

Policlinico Gemelli’s digital research centre, Generator RWD, will leverage Palantir Foundry as a critical enabling platform for effectively managing the vast and intricate landscape of healthcare data.

Foundry’s AI capabilities will be employed to generate Real World Evidence (RWE) in support of clinical and translational research efforts.

These endeavours include drug and indication discovery, advancements in patient care, and the development of digital medicine solutions for healthcare research not only in Italy but also within their global partnerships.

TIM is also looking to sell off its subsea cable unit, Sparkle, which had been valued at about €1 billion. KKR is also working to complete that purchase. The rump TIM company plans to focus on its consumer and enterprise digital service businesses.

It’s amazing how perfectly the story of TIM represents the ongoing strip mining of Italy for profit. Italy has been on sale for the past thirty years. The story is always the same: the sell off, this reform is necessary and it will make things better. Spoiler: it never does.

Franco Bernabe, a former CEO of Telecom Italia,  mourned the deal, saying that once the actual telecom infrastructure is sold, the company is essentially finished, and the group will be sold off one piece at a time. The “nationalist” Prime Minister Giorgia Meloni has now presided over the sell off of the country’s airline, ITA Airways, as well as Telecom Italia, and the EU is always pushing for more.

It can be argued this is a new low as it puts Italians’ sensitive internet and phone data in the hands of a CIA-connected private equity firm based in New York. While the Italian treasury contributes at least 2.2 billion euros to the TIM deal, its public finances are once again coming under heavy scrutiny from the EU. Rome’s recent budget increased next year’s deficit goal to 4.3 percent of GDP and doesn’t plan to get below the EU-imposed ceiling of 3 percent until 2026.

If Brussels insists on the 3 percent target, couple with the European Central Bank’s higher rates, such conditions could set off panic in the Italian bond market and open the Pandora’s box that was the euro crisis of 2010-12.

Rome and the EU are locked in perpetual theater over reforms to Italy’s economy that include selling off assets, reducing public spending and privatization. The workers lose in every rendition, as the Italian capitalist class use Brussels as the excuse to attack labor and cut social spending. Italy’s politicians say their hands are tied by Brussels. Currently it’s the billions coming Italy’s way from the EU’s Covid relief fund for which Rome is required to enact ongoing reforms.

The Western news media is once again running with the spendthrift-Italian narrative. Naturally the roughly $100 billion Rome, like most European capitals, has had to spend on energy assistance due to the Ukraine proxy war fiasco goes unmentioned.

Beyond that, the great irony when Italy is portrayed as a slow-moving backwards economy that is hesitant to reform and spends irresponsibly is that reality couldn’t be further from the truth.

The reason life in Italy keeps getting worse for the vast majority of Italians and the fiscal situation never improves is precisely because it enacts the neoliberal reforms that Brussels prescribes.  According to economist Philipp Heimberger: 

The mistakes that were made 40 years ago took place in an environment of rising interest rates. Since then, the Italian state has been carrying a heavy interest-rate backpack. If we exclude the burden of interest rates, however, the Italian state consistently ran budget surpluses from 1992 up to the Covid-19 crisis. Even Germany, Austria and the Netherlands recorded a comparable ‘primary’ budget surplus less frequently than Italy. The Italian state has not been as ‘profligate’ as is often claimed: it has consistently collected more in taxes than it has spent. IMF data show that Italy implemented the most severe fiscal consolidation packages of all advanced economies between 1992 and 2009, especially when it comes to spending cuts.

Italy’s “reform efforts” have been significant; Italy is actually a top performer in liberalising reforms over the past decades compared with other advanced economies. Overall, Italy has adhered much more closely to the EU’s reform policy rulebook than Germany or France.

A flexibilisation of the labour market since the 1990s brought a sharp increase in fixed-term contracts, a pushback against trade unions and a decline in real wages compared to Germany and France. These measures not only reduced inflation in the 1990s. Cheap labour has increased the labour-intensity of production, thereby reducing the incentives for labour-saving investment by companies. Private investment, however, is key to rising productivity and is particularly crucial in high-tech sectors. Productivity growth is in turn the basis for growth and rising incomes. Market-liberal labour market reforms have thus arguably done more harm than good to Italy’s productivity growth.

What has this meant for italians? The data is staggering:

Annual net income of the Italian household, which was €27,499 (at constant 2010 prices) in 1991, declined to €23,277 in 2016—a drop in median living standards of 15%. Mean net household income fell by €3,108 between 1991 and 2016 or by about 10%. Italy is the only major Eurozone country that, in the past 27 years, suffered not stagnation but decline.

Telecom Italia’s downfall over the past thirty years mirrors the disastrous path the Italian state has been on. In 2000 the standard of living in Italy was comparable to that of Germany. Today, Italy’s per capita income levels are 20 percent below Germany’s. During that same time Italy has become one of the most unequal societies in Europe.

While wealthier Italians (what economist Stefano Palombarini calls the country’s “bourgeois bloc”) support the country’s neoliberal transition and find a voice in every Italian government, the working class has been abandoned by every Italian political party for 30 years.

Ever since the Italian Communist Party – long one of the most powerful in Europe – finally capitulated to CIA efforts to destroy it in the 1990s, Italy’s working class have lacked a political home, and the neoliberal project continues no matter who is in government. Intentionally or not (maybe the memory of how receptive Italy was to communism post-WWII plays a role) Italy is kept in a perpetual state of crisis, but it’s gaining company these days.

Neoliberal reforms are increasingly coming for all of Europe. Maybe Italy has been more of a test lab – see how much you can crash living standards while getting voters to continue to believe in the EU project?

Despite campaigning as an Italy-first candidate, Meloni has done nearly everything the EU wanted, caving to threats from EU Commission President Ursula von der Leyen. Meloni declared fealty to the EU and NATO, broke campaign promises in order to scale back meager social spending plans, actually increased work permits for immigrants, and appointed pro-EU Atlanticists to key positions like economy minister and foreign minister.

The biggest political winner since Italy joined the EU has been demoralization and Meloni and company are likely to push more voters into that group. Turnout in last year’s September election was the lowest since World War Two. Many of those who didn’t bother to go to the polls were working class voters.

While this is likely the outcome that Brussels prefers – unelected technocrats running the neoliberal show – they are creating a groundswell of opposition to the EU and are now pushing up against the limit of how bad they can make workers’ lives. 66 percent of the EU working class feel their quality of life is getting worse. Trust in EU institutions also continues to decline.

The sell-off of TIM assets is just another reminder of how the EU strangled once-proud state companies and hurt workers.  Despite Italy’s problems, a majority of Italians so far continues to be in favor of EU and Eurozone membership. However, support has been falling fast, and as is the case across much of Europe, support for the EU in Italy is already largely divided along class lines:

Recent survey evidence suggests that support for the euro has a clear income and class bias. The perception of having benefited from the euro grows with income and is highest among self-employed professionals and large employers, technical (semi-)professionals, and associate managers, while production and service workers and small business owners are much less likely to report that they have benefited from the euro. In brief, in Italy support for the euro is concentrated among the economically better off and, with regard to partisan choice, among voters of the centre-left. In turn, the more a person has benefited from the euro, the more likely she/he is to report that she/he would vote to remain in the euro in a hypothetical referendum. Importantly, the majority of Italian voters report that they have not benefited from the euro, which makes support for the single currency rather fragile.

With youth unemployment through the roof, younger Italians overwhelmingly believe their lives will be worse off than their parents and hold more eurosceptic positions.

Print Friendly, PDF & Email


  1. DJG, Reality Czar

    Conor Gallagher: Complimenti. I have been following this story of the asset-stripping of Tim for months, and I am glad that you put it in the larger picture of how much ordinary Italians have had to give up for the sake of the relative tranquillity of the EU. Heck, at least, the regular German invasion now consists mainly of tourists.

    Sei sempre spiritoso:

    led by purported nationalist prime minister Giorgia Meloni,

    Rido a crepapancia.

    Fratelli d’Italia and the Lega are now operating as suburbs of the U.S. Republican Party, importing every lunatical economic plan by the current Republican mainstream. As I have mentioned, both Meloni and Matteo Savini have graced the CPAC conservo-jamboree to learn more about opportunities for looting the government and drowning it in the bathtub.

    And just to point out how foreign companies (Anglo-American) would like to get into telecoms and skim: My current cellular monthly plan (with FastWeb, a Swiss company) is nine euro. Yep, nine euro. My WWW service, also with FastWeb, is 28 euro a month.

    And service is better here in the Undisclosed Region than it was in Chicago, where I was paying AT&T something like 50 bucks a month for cellular service and over 70 bucks a month for WWW.

    So you can see the potential to skim, eh. Too bad about those sudden price rises, eh?

    1. lyman alpha blob

      Wow, that is extremely cheap compared to what we pay in the US. Sounds like you are well aware of what’s coming – I’d get ready for your bills to at least triple, along with crappier service as an added bonus.

      I really don’t understand where these venal people come from who are so willing to sell their own people down the river. Seems to me that European “leadership” would do well to ponder the fate of Nikolai Ceaușescu before making these sorts of decisions…

      1. playon

        The US is one of the more expensive places for cell phone and internet service. When we lived in Thailand it was $20 a month for cell service and it was easy and cheap to add minutes if you needed more. Our internet was included in the rental of our small apartment in Chiang Mai, the total cost was under $250 a month. The big problem in the US is the monopolies held by cable and cell phone companies.

      2. Kouros

        Except that Ngood old Nicolae never sold his country and his people. When he died, Romania had no debt and was trying to get out from austerity.

      3. Hai

        It is the same year Ceaucsescu paid off all of Romania’s IMF debt and tried to create an alternative to the “international rules-based order” that the US overthrew him. Not unlike Ghaddafi…

        He was killed for trying to do what Saddam Hussein & Ghaddafi tried. All three shared the same fate.

        Here’s a great documentary from a time when French-German public TV channel ARTE was still producing good stuff. Colour Revolution in ’89 and the overthrow of Romanian President Ceaucescu. German title: Schachmatt: Strategie einer Revolution

        Fascists in Romania were members of the Iron guard. They hung children from meathooks! Jews were forced to clean the blood from the pavement after the Iron Guard killed their families. The CIA admitted to using them for their coup in 1989

        Immediately Romania’s post-coup government went in and put the country back under the axe of the IMF.

        1. lyman alpha blob

          Thanks for the documentary link. I should have, but hadn’t, known there was so much Western involvement in Ceausescu’s overthrow.

    2. Rubicon

      We have friends in Italy. They are aware of this take over and equate the huge costs of US health care and have a pretty good idea as to what will happen to them.

      It seems that in Italy, dental care if privately owned and costs are high. But w/ this new problem, most likely all those dentists will be swept up into this new matrix.

      However, there’s one out that many Europeans have: it’s a short flight to Central & Eastern Europe to receive health care there.including dentistry. Open that avenue stays open for them.

      As for being engulfed into the EU, it’s been an onsloughlt for millions there. Now comes this new threat.

  2. divadab

    Sell off public infrastructure to private equity – what could possibly go wrong? Cockroach Capitalism at its finest.

    1. Morincotto

      Still more “neoliberalism for thee but not for me” though.

      If anything in the US itself the influence of certain organs of the state, the “Permanent National Security State” variety, over the economy seems to grow all the time.

      With a lot of economic interests being subordinated to the pure power politics interests of the Empire.

    2. Feral Finster

      If it raises enough dough to keep the economy from collapsing for a little while longer, then the sell-off did what it was intended to do.

  3. Rita

    Old italians are immigrating to Albania, where their pension has more purchasing power.
    Italian students also are studying in Albania. Once they get the diploma, they return to Italy. Our dentists are getting rich from Italian clients, who still spend less than in Italy.
    There are now 20,000 italians living in Albania. But our prime minister will soon open in Albania immigration process centers for the Africans going to Italy, so Albania may not remain for long the poor but secure country, where Italians can forget the ills of the Italian society.

  4. Colonel Smithers

    Thank you, Conor.

    Circa 2010, I was working on banking reforms at the bankers’ association. We were discussing the orderly wind up and liquidation of banks. An American consultant and former Fed official said banking regulation was treated as a national security issue by the US. It was US regulators who insisted that US banks sweep all of their liquidity from branches overseas to head office every Friday.

    The weekend would be the time a bank would be taken over by regulators and its future sorted out.

  5. Feral Finster

    “Despite campaigning as an Italy-first candidate, Meloni has done nearly everything the EU wanted, caving to threats from EU Commission President Ursula von der Leyen. Meloni declared fealty to the EU and NATO, broke campaign promises in order to scale back meager social spending plans, actually increased work permits for immigrants, and appointed pro-EU Atlanticists to key positions like economy minister and foreign minister.”

    Why does this surprise anyone? Meloni could personally feed refugee toddlers alive to piranhas and nobody would raise a peep, as long as she does not question American hegemony in general or the War On Ukraine in particular and her plausible opponent does so.

    “The biggest political winner since Italy joined the EU has been demoralization and Meloni and company are likely to push more voters into that group. Turnout in last year’s September election was the lowest since World War Two. Many of those who didn’t bother to go to the polls were working class voters.

    While this is likely the outcome that Brussels prefers – unelected technocrats running the neoliberal show – they are creating a groundswell of opposition to the EU and are now pushing up against the limit of how bad they can make workers’ lives. 66 percent of the EU working class feel their quality of life is getting worse. Trust in EU institutions also continues to decline.”

    Nobody of influence and authority cares in the least whether the plebes are happy or not, as long as they do not actually do anything about their lot. As always, the question is this: So what are they going to do about it?

  6. Tom67

    Same in Germany. Working class people are getting more and more disgusted by the EU. It is the same kind of people “center left” who support the EU. Except things are moving much faster in Germany. The erosion of public trust has reached a momentum, that is scaring the pants off of our betters. Censorship is their answer. The question is how long this can go on…

  7. Noah

    There’s little difference between KKR, BlackRock et al “top US private equity” cos., the Sacklers or Sam Bankman-Fried – -scammers all without a conscience. Criminal syndicates can always work with other criminal syndicates, which is what you have with elements of the EU.

    Not only have these fraudsters destroyed the US economy and its institutions, but are taking the world to WWIII, while squeezing profits from what pebbles are left.

    Bill Ackerman is at war with Harvard because it’s not squashing freedom of expression over Israeli genocide.

    Can’t see a good ending to any of this.

  8. JCC

    When I’m done reading these excellent and informative articles like this one and Yves’ post on IMDoc’s observations today here on NakedCapitalism, all I can see for the future is a Ridley Scott world that looks a lot like Bladerunner.

    Hopefully I’m out of line but, overall, things don’t seem to be looking too good for the West and its so-called democracy in the near, or far, future.

Comments are closed.