It is almost certain that the government's plan to contain debt by raising about 20 billion euros over three years through the sale of state assets will not achieve its goals because of persistent political and regulatory obstacles.

This is the view of analysts and officials.

Last September, the Meloni government announced the initiative as part of attempts to manage a public debt that will be around 140 percent of gross domestic product in 2026. Assets earmarked for sale include stakes in Poste Italiane and Ferrovie dello Stato.

Despite attempts by successive governments to raise significant funds, revenues have averaged less than 1 billion euros per year over the past decade.

As with her predecessors, Meloni's ambitious goal is complicated by the need to maintain a balance between the need to raise funds and Rome's desire to ensure that control of key sectors remains in public hands.

The premier faces a coalition reluctant to loosen the state's grip on companies considered key utilities, officials said.

Italy has already scaled back plans to cut its stake in Poste, which is a major employer and traditionally holds a substantial amount of Italian citizens' savings.

Since November, the Treasury has raised about 3 billion euros by reducing holdings in Monte dei Paschi and Eni.

However, officials said the government's main goal is to sell small stakes in the state's investees to investors to improve management and profitability.

"The devil is in the details," commented Fabio Scacciavillani, asset manager at advisory firm Nextperience.

"The sale of a government stake should lead to an improvement in the management, governance and profitability of the state-owned company, otherwise it simply results in the sale of a stream of future dividends to lower the current level of government debt, but with limited effects on its sustainability."

In April, the government appeared to have scaled back its ambitions, announcing new debt projections that included the sale of assets worth 0.7 percent of GDP, or 16 billion euros, down from 20 billion.

When asked for clarification, the Treasury provided no further details. The Parliamentary Budget Office (UPB) said that without the promised divestments, debt would rise to about 141 percent of GDP in 2026.

A recent report by rating agency Scope said that without fiscal adjustments, Italy's debt-to-GDP ratio would be the highest in Europe in 2028, higher than Greece's.

"Privatizations are a fundamental tool for modernizing the country, capable of making Italy more competitive internationally," Tullio Ferrante, a member of Forza Italia and undersecretary at the Ministry of Infrastructure and Transport, told Reuters.

"The government, with the Nadef, has expressly provided for the use of a serious and credible privatization program. The goal is to rationalize the presence of the state, to reduce it where it is not needed and reaffirm it in other contexts."

SHOW GOODWILL

Francesco Galietti, of Rome-based political risk consultancy Policy Sonar, cited Treasury estimates that total debt will exceed 3 trillion euros next year and said any sale would not make a big difference.

But Italy, the euro zone's third-largest economy, must show good will in reducing the burden, as it is likely to come under close scrutiny of its finances by the EU after elections for the European Parliament this weekend, Galietti said.

"The elections will mark the end of the grace period granted to Meloni," he told Reuters.

While the Economy Ministry seems confident it can push ahead with plans to divest control of Mps as agreed with Brussels, raising more money through other assets will be difficult, officials said.

In the case of Ferrovie dello Stato, Rome must take specific regulatory and legislative steps to disclose all of the group's assets and allow investors to evaluate them before selling part of the company.

A source familiar with the discussion said one option under consideration proposes to offer the railway group guaranteed and steady returns on investments before a listing. The plan would take several months to implement, and a reform of the National Transport Authority would be needed for it to comply with the new system.

"The idea is to allow private investors to enter a wholly state-owned company," Undersecretary Ferrante said.

"These are, of course, complex but strategic operations, which will make it possible to increase the efficiency of the system-country."

(Translated by Chiara Scarciglia, editing Stefano Bernabei)