One of the most radical proposals in the programme of Italy’s anti-establishment coalition is to issue securities to pay off individuals and companies who are owed money by the state as payment for services or as tax rebates. Following are some questions and answers about the so-called “mini-BOTs”, named after Italy’s short-term Treasury bills. HOW WOULD IT WORK? The Treasury would print billions of euros of non-interest-bearing, tradeable securities which could then be used by recipients to pay taxes and buy any services or goods provided by the state, including, for example, petrol at stations run by state-controlled oil company ENI. According to Claudio Borghi, the economics chief of the far-right League, who is the main proponent of the scheme, the certificates would quickly become accepted more widely and used as a form of money to be “spent anywhere, to buy anything.”
Initially they would be used only domestically and would not be traded on international financial markets. WHAT IS WRITTEN IN THE COALITION PROGRAMME? The programme says “something must be done to resolve the problem of the public administration debts to taxpayers.” It says the solution could be “the securitisation of tax credits, through instruments such as small-denomination state bonds.” In order that these not be classified as additional public debt, it calls for “a redefinition of statistical indicators at the European level,” and “a reassessment of the definition of public debt.” WHY ARE PEOPLE ALARMED? The League and its coalition partner, the anti-establishment 5-Star Movement, both have a history of euroscepticism, though their programme contains nothing that calls into question Italy’s membership of the single currency. Critics see the mini-BOTs as a way of issuing a parallel currency with the aim of allowing Italy’s economy to continue to function if it leaves the euro zone.
Borghi is openly hostile to the euro and says it is only a matter of time before it collapses. Italy’s outgoing economy minister Pier Carlo Padoan last year called mini-BOTs “a plan to circulate a disguised parallel currency”. Lorenzo Codogno, head of LC Macro Advisors and a former Italian Treasury chief economist, said the scheme would “increase both the budget deficit and the debt.” “It would signal that Italy wants to issue a parallel currency to prepare a euro exit, which the real objective of the League,” he added. WHAT ARE THE BENEFITS AND RISKS? Supporters of the plan say it will finally resolve the intractable problem of the state’s outstanding bills, which has weighed on Italy’s economy for years. They say that by providing money for consumers to spend and companies to invest, it can give a major boost to the country’s sluggish economy.
The impact on public finances is disputed. Critics say it will raise Italy’s public debt, already the highest in the euro zone after Greece’s. Supporters say mini-BOTs would not be new debt, but merely the securitisation of debt that already exists – hence the call for an official ruling by statistics authorities. IS IT LEGAL? Some say it could be deemed in breach of EU rules giving the European Central Bank exclusive power to issue currency in the euro zone. The European Commission has said there can be only one legal tender in the currency bloc. Dual currency proponents say there is no obstacle. They say “legal tender” is defined as a currency that sellers are obliged to accept. If there is no obligation, a dual currency does not infringe any EU treaties, they say. Borghi has drawn a parallel with luncheon vouchers, now used by millions of Italians to buy groceries in shops as well as meals in bars and restaurants.