Robert HARNEIS -TDO- (FRANCE) - A top government official from the ruling League party said on Friday Italy may issue small denomination bonds to help pay state debts owed to companies, Italian news agency AGI reported. The companies could then use the bonds to pay their taxes. It is a small step from there to the bonds becoming negotiable and circulating like money at a discount to the Euro.

The prospect of the so-called “mini-BOT” scheme, named after Italy’s Treasury bills, worries many investors, who fear they could become a parallel currency paving the way for Italy’s exit for the euro.

Following the passing of a motion approving the idea in the Italian parliament, the Treasury last week denied there were any plans to issue mini-BOTs, but cabinet undersecretary Giancarlo Giorgetti, who is close to League chief Matteo Salvini, said on Friday they were still being considered.

“It’s clear that all new solutions are contested,” AGI quoted him as saying at a rally near Mantua. “They are a way to accelerate repayment of public administration debts; they are one of the possibilities, one of the solutions.”

The League’s spokeswoman told Reuters she was unable to immediately confirm Giorgetti’s comments.

But the reality is that Matteo Salvini has been considering adopting the idea since before entering government. The proposal is also in the coalition agreement with the 5Star Movement and thus, unlike leaving the Euro, which was not, a legitimate possibility that cannot be ruled out. It would be difficult for the Europhile President Matarella to veto the idea claiming it had not been put to the people at the time of the election.

It is difficult to know if Salvini is bluffing or really moving gradually towards leaving the Euro. The move by the Eurosceptic government coincides with the leaked threat by the European Commission to fine Italy for breach of the deficit and debt rules. This leak in turn follows the success of Salvini’s League Party in the European Elections where they won 34% of the votes and Eurosceptic parties together won 58% in total.

It is significant that earlier in the year the Italian government took steps in parliament to bring Italy’s substantial gold reserves under direct government control – an essential move in the event of Italy leaving the Euro.

Italy’s government debt is 133% of GDP and rising. The Italian banks are weighed down with serious bad debt problems.

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