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  • Giovanni Tria at the Lower House of the Parliament in Rome, Italy, December 29, 2018.

    Giovanni Tria at the Lower House of the Parliament in Rome, Italy, December 29, 2018. | Photo: Reuters

Published 8 June 2019

The far-right coalition's idea of issuing "promissory notes" to pay public debts would go against the Euro-related regulations.

Italy's Minister of Economy Giovanni Tria warned Saturday that creating a kind of parallel currency to pay public debt would be illegal and useless.

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"It would be illegal and useless for Italy to issue bonds to pay its suppliers because that would violate the rules of the European currency and also add more debt to the existing one," said Tria during the Group 20 (G20) ministerial meeting being held in Fukuoka, Japan.

As part of the far-right pact to govern the country, the Five Star Movement (M5S) and the Leage parties proposed to issue "promissory notes" the Italian state can pay back in installments.

The price of the "mini Buoni Ordinari del Tesoro" (minibots) would not be decided through traditional bond auctions or market-based procedures. Instead, they would be non-interest-bearing bonds with no maturity, making them something similar to conventional fiat notes because they would be paper vouchers having values ​​of 20, 50, 100 and 200 euros.

However, since they could be used both collect public debt and pay taxes or retail consumptions, minibots could become a currency parallel to the Euro. This could permit the Italian government to bypass the EU spending limits and debt ceilings.​​​​​​​

Similar ideas to the proposed Italian minibot have been used by countries with budget problems. In Argentina, for example, during the 2002 crisis, subnational governments issued their own "papers" to pay their suppliers and officials. 

John Dizard wrote in the Financial Times in May 2018, when the minibots idea began to take shape, that this scheme would largely benefit the already rich. "The big profits would go to those who would buy mini-BoTs from pensioners and state creditors at a discount, say 20 or 30 percent. They will then sell the quasi-currency to deeppocketed buyers of Italian goods and services, or property and equities."

Germany would prefer to invite Italy to leave the Eurozone rather than accepting the large-scale introduction of minibots,  the Spanish media El Economista says.

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