View from City Road: The pain of privatisation

Stand by for indigestion. European stock markets are going to have to swallow privatisation issues worth up to dollars 150bn over the next five years. That, as the broker Morgan Stanley has pointed out, is almost three times as much as UK sell-offs have raised to date and represents 2.5 per cent of total EC gross domestic product.

Given the way governments in the West are increasingly turning to the bond markets to finance budget deficits, the stocks in question are going to have to taste good, especially since they will have to appeal to foreign preferences. Net investment by non nationals of dollars 12bn a year for the next three years will be required just to finance the capital requirements of France, Spain and Italy.

An uphill task, yet one which should be possible, thanks to the nature of the companies to be privatised. Up to a quarter of the stocks in question are likely to be telecommunications issues, with other utilities also heavily represented. Ensuring they are sufficiently profitable to have investors licking their lips should be a doddle. Lucky for governments; less lucky for the poor consumer.