Italy Considers Moves Toward Monetary Sovereignty

re posted from                                  EXECUTIVE INTELLIGENCE REVIEW

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This article appears in the June 21, 2019 issue of Executive Intelligence Review.

Italy Considers Moves Toward Monetary Sovereignty

 

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Aureliano Ferri
Antonio Maria Rinaldi (right) with Claudio Celani in Ascoli Piceno, Italy in December 2018.

June 17—An Italian move to assert financial sovereignty is driving European Union supranational institutions and some European chancellorships berserk. It concerns a proposed means of payment, called “mini-BOT,” which is formally neither currency nor government debt, but could become a sovereign currency in case of an acute confrontation between Italy and the EU on economic policy.

On May 28, the Italian Chamber of Deputies approved a bipartisan, non-binding motion recommending the government introduce a means of payment called mini-BOT as a way to pay debt in arrears to vendors and taxpayers, amounting to up to 53 billion Euros. Although the name mini-BOT means literally “mini-Treasury bonds” (Buono Ordinario del Tesoro), the proposed mini-BOT is not a government debt note, but a bill that can be used to pay taxes. In other words, it is a swap between government debt to vendors and taxpayers’ debt to the government. Thus, mini-BOTs are not a parallel currency—not yet.

However, the inventors of the mini-BOTs hope that they can be used on a voluntary basis among third parties (who can pay their taxes with it) as well, thus increasing liquidity in the real economy. And, in an extreme case, from being a non-legal tender bill, the mini-BOT could become legal currency in case of an emergency.

Such an emergency is closer than one might think.

The Italian government has made clear that it is sticking to a non-austerity budget for 2020. In the past, such a policy course has cost Greece a surrender to a brutal fiscal therapy enforced by a caretaker committee, called the “Troika” and composed of the EU Commission, the European Central Bank (ECB), and the IMF. Greece had no choice but to surrender, because the ECB suddenly cut emergency liquidity to Greek banks in 2015. As a member of the Eurozone, the Greek central bank could not provide the required liquidity, because the power of currency emission lies exclusively with the ECB.

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