The Economist February 26th 2022 Finance & economics 71Italianbillionairesbattle
Ciao, salotto buono
T
wenty yearsagoMediobancawasthe
epicentre of the salotto buono(the “fine
drawing room”), a group of old-fashioned
firms whose web of cross-connections
dominated Italian business. Times have
changed. Today the Milanese bank is in the
modernising camp in a fight with two su-
per-seniors over the future of 190-year-old
Generali, Italy’s biggest insurer. Its out-
come could decide whether Italy’s cor-
porate governance is at last thrust into the
21st century.
The power struggle pits Alberto Nagel,
boss of Mediobanca, against Leonardo Del
Vecchio, the 86-year-old founder of Luxot-
tica, an eyewear giant, and Francesco Gae-
tano Caltagirone, a 78-year-old construc-
tion tycoon. Both sides own big stakes in
Generali: Mediobanca controls 17%, while
the pair together own 14%. At stake is the
future direction and governance of one of
Italy’s biggest firms. Mr Nagel thinks Gen-
erali is on the right path under the steward-
ship of Philippe Donnet, the group’s
Frenchceowhosemandateisupforre-
newalattheannualgeneralmeeting(agm)
inApril.MessrsDelVecchioandCaltagi-
roneareagitatingforregimechangeatthe
venerableTrieste-basedinsurer.
Exactlywhyisnotclear.Theyhavenot
comeupwithabusinessplanoranalter-
nativecandidateforceo.Theyseemun-
happywithGenerali’smergers-and-acqui-
sitionsstrategy,whichtheyconsidertoo
timid.Thefirm’srecenttakeoverofCattol-
ica,aparochialrival,wasnotthekindof
dealtheywanttosee,whichisbigandin-
ternational.TheycomplainthatGenerali
shoulddomoretodigitiseitsoperations.
InfactMrDonnetseemstohavedonea
goodjobatGenerali.Hehasstrengthened
itscapitalpositionthroughthesaleofpe-
ripheralbusinessesandimprovementsin
profitability.Hehaslowereditsdebtbur-
denandchangeditsbusinessmixaway
fromproductsthateatuptoomuchcapi-
tal,suchasguaranteedlife-insurancecon-
tracts,tofee-payingones,suchasproperty
andcasualtypolicies.Inrecentmonthshe
hasledacquisitionsthatincreasedGenera-
li’sshareincoreEuropeanmarkets.And
Generali has pioneered software that
writesinsurancecontractsonitsown.
What’smore,Generalihasbecomea
cashmachinethatmakesinstitutionalin-
vestorshappy,saysAndrewRitchieofAu-
tonomousResearch.WhenMrDonnetpre-
sented his three-year plan in December he
promised cumulative dividends of almost
€6bn ($6.8bn), forecast an annual rise in
earnings per share of 6% to 8% and an-
nounced a €500m buyback.
So what motivates the dissident duo? A
loss of influence, perhaps. In the old days
of the salottothe ceoof Generali would
dine with important shareholders before
announcing strategic decisions or new
board members. Those days are gone as the
insurer continues to bring its governance
in line with European norms. Under rules
Mr Donnet introduced in 2020, the outgo-
ing board last month recommended new
directors for the ten-strong body—as is the
case at some continental blue-chips. The
duo dislike the new rules.
On the face of it they scored a victory on
February 18th, when Gabriele Galateri di
Genola, Generali’s chairman, said he
would step down at the end of his third
termin April. But Mr Galateri did not leave
because the duo pushed him out. He left
because he supports Mr Donnet’s drive to
modernise Generali: under the new gover-
nance rules, three terms is the maximum.
It is likely, in fact, that Mr Donnet will
still be in his job after the agmon April
29th. Analysts assume that Mr Nagel and
investors who represent 35% of shares will
prevail. This may upset the silver-haired
rebels—but there is a silver lining,too.As
top shareholders, they stand to pocket
giant dividends in the coming years.The retro campaign of two grandees of
Italian business
inated in grams of gold.Ofthe 86 tonnes’
worth issued since2015,about60%were
sold after the pandemicbegan.Andthe
gold monetisation scheme,whichallows
households to handgoldovertoabankand
earn interest, was revampedlastyeartore-
duce limits on the sizeofdeposits.
Lockdowns inadvertentlyhelpedthe
state’s agenda. ResearchersattheIndian
Institute of ManagementinAhmedabad
found that when shopsshutandsalesof
physical gold groundtoahalt,someIndi-
ans turned to onlinealternatives.Mobile
payments platforms likePhonePe and
Google Pay reportedrisingappetitefordig-
ital gold, which is soldonlineandstoredby
the seller. Money alsorushedintogoldex-
change-traded funds(etfs).Theirassets
hit 184bn rupees ($2.5bn)inDecember,a
30% rise in a year.
Still, only a sliverofthepopulation,
mostly well-off urbantypesandmillenni-
als, invest in complexfinancialproducts.A
large part of India’sdemandforphysical
gold comes from ruralareas, whereit
seems in no dangeroflosingitslustre.
Those in far-flungvillagesdon’talways
have a bank accountorasmartphone,mak-
ing it hard to buy goldonline.Norcould
they easily show offdigitalmetaltothe
neighbours or lendtheirdaughteranetf
to wear on her big day.
InflationinTurkeyGetting sticky
A
t least bycomparison with last year’s
disaster, when it crashed by 44%
against the dollar, Turkey’s lira has had a
good run of late. Since January the curren-
cy has lost only 4% of its dollar value. Part
of the reason is a scheme to protect lira de-
posits against swings in the exchange rate,
which the government introduced in De-
cember, and which has suppressed de-
mand for hard currency. Another factor is a
series of interventions in currency mar-
kets by Turkey’s central bank. The latest of
these came on February 22nd, when the
bank reportedly sold about $1bn in foreign
reserves, helping the currency absorb
some of the shock waves from the run-up
to Russia’s invasion of Ukraine.
The lira may have recovered its footing.
But the spike in inflation set off by the cur-
rency’s collapse last year is here to stay. The
officially reported inflation rate rocketed
to a ghastly 48.7% year-on-year in January.
Forecasts see the rate peaking in the
spring, and finishing the year well above
30%, thanks largely to base effects. Surging
energy prices, as well as widespread fears
that the government has been massaging
the inflation data, have sparked protests in
parts of the country. The leader of Turkey’s
main opposition party has announced he
will not pay his electricity bills unless
President Recep Tayyip Erdogan’s govern-
ment reverses recent price rises.
Unfortunately for Turks, who are quick-
ly becoming used to stockpiling non-per-
ishables and basic necessities, stabilising
the exchange rate will not be enough to
bring inflation under control. Inflation is
bound to remain high because of rising
wages (Turkey recently increased the mini-ISTANBUL
With its president’s policies, Turkey
cannot hope to bring down inflationThe sum of all fears