Italy will retain 51 percent of Poste Italiane, the Treasury told labor unions, scaling back an earlier plan to reduce the state's stake to 35 percent from the current 64 percent.

The move highlights the government's difficulties in meeting its commitment to use asset sales to contain Italy's huge public debt.

Prime Minister Giorgia Meloni had announced a decree in January to allow the Treasury to divest all or part of its 29.3 percent stake in Poste, maintaining control through another 35 percent stake held by Cassa Depositi e Prestiti.

But after facing widespread criticism for selling off part of a key public service, the government now intends to revise the decree to divest a smaller stake in Poste, the Treasury said in a meeting with labor unions.

"We have been assured that the state will never go below 51 percent," Cisl representative Raffaele Roscigno told reporters.

The scaled-down sale is part of Rome's plan to raise about 0.7 percent of GDP from asset sales between 2025 and 2027 to curb one of the world's highest public debts relative to the national product.

Italy's debt, the second highest in the eurozone after Greece, is seen rising to 140 percent of GDP by 2026, before starting to decline marginally the following year.

The final decree is expected to be adopted in the next three weeks, Roscigno said, adding that it will provide incentives to persuade Poste employees to buy the company's shares and maintain a broad shareholder base.

In 2015, Italy raised 3.1 billion euros by placing 35 percent of Poste in an IPO that valued the group at 8.8 billion euros. Today Poste is worth 16.5 billion euros.

The Treasury would thus pocket just over 2 billion euros from the sale of about 13 percent of Poste.

Unions remain cautious after the Treasury's announcement, with CGIL calling on the government to abandon any divestment plans.

"The sale would be a bad deal for the country," said Fabrizio Solari of the CGIL.

The unions argue that the proceeds from any sale would in any case be less than the dividends paid by Poste over a long-term horizon.

Poste plans to pay 6.5 billion euros in dividends between 2024 and 2028, more than the 3.8 billion euros distributed in the previous five years.

In its quest for liquidity, Palazzo Chigi has raised 3 billion euros since November 2023 through the sale of shares in Monte dei Paschi and Eni.

(Giuseppe Fonte, translated by Luca Fratangelo, editing Sabina Suzzi)