Italy wants more public debt in domestic hands -economy minister

1:49 pm Tuesday, October 31st, 2023

By Giuseppe Fonte

ROME (Reuters) -Italy wants domestic investors to hold an increasing amount of the government’s debt, Economy Minister Giancarlo Giorgetti said on Tuesday, as Rome seeks to limit the impact of future global crises on the country.

The sustainability of Italy’s huge public debt, already euro zone’s second-largest after Greece in relation to gross domestic product, has long been seen as a crucial factor for the survival of the euro zone.

In a speech to bankers in Rome, Giorgetti said the recent success of bond issues dedicated to Italian retail investors was “a very important sign” of trust between the government and savers.

“That is part of a broader strategy aimed at placing the main part of the public debt within our country, as it should be,” he said.

Italy has collected around 45 billion euros ($47.93 billion) this year through the ‘BTP Valore’ and ‘BTP Italia’ bond offerings specifically for retail investors.

Bank of Italy data showed that in July foreign investors held a 27.4% stake of the country’s 2.84 trillion euro public debt.

To further boost domestic holdings, Rome’s 2024 budget includes a measure to partly discount government bond income from the ISEE, a wealth indicator that determines access to welfare benefits under government means testing.

According to the bill, taxpayers can deduct a maximum of 50,000 euros in sovereign bonds and investment products for small savers whose repayment is guaranteed by the state.

The opposition and academics criticized the proposal, saying it would blunt welfare programmes’ focus on the poor.

A government document seen by Reuters showed the measure would increase annual spending by 44 million euros starting in 2024, as state subsidies rise when more people become eligible for them.

Giorgetti on Tuesday stressed the need for the Treasury to consolidate the “confidence of savers and markets in Italy” against a difficult economic backdrop in which the risk of a new global recession “is not entirely unlikely.”

The government last month raised its budget deficit targets for the 2023-2025 period, worrying markets and setting it up for a possible clash with the European Commission.

($1 = 0.9388 euros)

(Additional reporting by Angelo Amante and Valentina Consiglio in Rome, Sara Rossi in Milan; Editing by Gavin Jones and Richard Chang)