Italy’s Toying With a ‘Mini-BOT’ Worries E.U. and Investors

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ROME — Even by the high standards of anxiety surrounding Italy’s troubled economy, the angst pervading the debate these days has taken on a markedly desperate air.

Italy’s nationalist government is again balking at the European Union’s demands to decrease its crippling debt. Its ministers are in open war over whether to cooperate. Almost daily, it seems, a new scheme is floated to scramble out of the deficit maze, as the country’s leaders try to keep their populist spending plans.

But one proposal has caused particular consternation and raised fresh concerns that Italy, the third largest economy in the eurozone, could explode the entire bloc. That land mine, critics say, is called the mini-BOT.

An acronym for Mini Bills of Treasury, the mini-BOT is an instrument similar to an IOU that its supporters believe will allow the cash-strapped Italian government to pay debts, stimulate the Italian economy and give Italians a way to pay their taxes.

But financial experts warn that the mini-BOT could create a parallel currency that will ease Italy out of the eurozone.

“It’s a first step to prepare EurExit, so I think it’s extremely dangerous,” said Riccardo Puglisi, associate professor of economics at the University of Pavia.

The mini-BOT has long been a glimmer in the eye of the euroskeptic League party of Italy’s de facto leader, Matteo Salvini. As often is the case, his coalition partner, the Five Star Movement, has followed his lead.

So far their government has only put the idea before the Italian Parliament in a nonbinding vote, which unanimously endorsed a proposal to study creation of “government bonds in small denominations” to speed up the paying of its debts.

But even that was enough to rattle investors and economists, as well as European Union officials, and to revive questions about the real intentions of the government, as well as its seriousness.

The introduction of a parallel currency is illegal under European Union law, and would threaten to bring the entire eurozone tumbling down because it would erode the very premise of the euro as a single monetary unit.

Supporters of the mini-BOT dispute that and say it is not legal tender, but only a way for the government to pay its debts — which would in any case, experts point out, increase Italy’s debt.

Many experts doubt the government truly intends to introduce the mini-BOT, which requires legislation by Parliament. Some said the proposal for study was introduced in such an underhanded way that they did not even know what they were voting on.

The euro remains popular in Italy. So many finance experts suspect that the government intends to use the threat of the mini-BOT as leverage in negotiations with Brussels.

But even that, they warn, could be disastrous.

“It would be like pointing a gun to your head and expecting the others to do what you say just because otherwise you kill yourself,” said Lorenzo Codogno, founder and chief economist of the consulting firm, LC Macro Advisors and the former chief economist at the Italian Treasury Department.

Italy’s economy minister, Giuseppe Tria, is seeking to work with Brussels, which this week is threatening to begin a process that could impose billions of euros in fines on Italy for not reducing its debt, forecast to rise to 135 percent of gross domestic product this year.

“I want to underline that there is no study of any measures aimed at the issuing” of mini-Bots, he told Parliament on Wednesday, trying to reassure Brussels and investors.

In the past, Mr. Tria has specifically dismissed the mini-BOTs. Mario Draghi, the president of the European Central Bank, the only eurozone institution authorized to issue money, has also dismissed them.

“They are either money — and then they’re illegal — or they’re debt, and then that stock goes up,” he said. “I don’t think there is a third possibility.”

But reality is often a hurdle Italy’s populists are willing to overcome.

While Mr. Salvini and other leaders of Italy’s populist government say they have no interest in leaving the European Union or euro, for years they made it seem as if they did.

Mr. Salvini used to wear shirts that read “No More Euro” and said in 2016 that he would leave the euro “tomorrow morning” and that everyone understood a vote for his party was a vote to leave the euro and return to a national currency.

One of his top economic advisers, and a father of the mini-BOT, the League lawmaker Claudio Borghi, has been equally explicit.

In a brochure entitled “MINI BOT: Democracy and Sovereignty,” he offered possible designs for the bills, decorated with various cathedrals and Italian personalities, including Orianna Fallaci, the Italian journalist who developed an antagonism to Islam, on the 20 mini-BOT bill. (Mr. Borghi’s own Twitter avatar shows his face on a 10,000 lire note.)

In a book discussing the mini-BOT, Mr. Borghi wrote that once the mini-BOTs were widely distributed in Italy, they would become a “‘spare tire that will make the possible changeover to our currency much easier.”

If Italy ever decided to leave the euro, as he hoped, it wouldn’t have to wait to print bank notes “because everything has already been done: on the day of the changeover, it will be sufficient to declare the mini-Bots new currency,” he wrote.

Mr. Borghi and his supporters, most notably Mr. Salvini, who seems to think the mini-BOTS could facilitate his delivery of income tax cuts at the center of his agenda, remain interested in the idea.

This month, Mr. Salvini said in a statement that the economy ministry needed to understand that it was “urgent” that the government pay its debts to suppliers. “It is a question of justice,” he said.

Supporters of the mini-BOT believe it provides a quick way for the Italian government to pay its debts to commercial businesses with short term, no-interest bonds secured on future tax revenues.

But since Italians could also use the instrument to pay taxes, its worth would be on par with the euro, increasing the likelihood that Italians would trade them like money. That would mean more business for Italian shops and the Italian economy, while not technically putting more currency in the market.

Supporters believe the mini-BOTs would prevent a run on the Italian banks if the country ever left the euro, because it could automatically switch over to the new currency.

Economists say there is a lot wrong with that picture, but Mr. Puglisi said it also ignored that people are rational and would see the writing on the wall and move their money out of Italian banks the moment mini-BOTs hit the market and before they were stuck with a devalued currency.

That, and the assurances of Italy’s economy minister, has helped settle some anxieties about the imminence of the mini-BOT. For now.

“It’s quite possible that at some point Italy enters a crisis and has no choice but to restructure the debt,” Mr. Codogno said. “Then at that point, there might be a temptation by the government, “O.K. let’s forget about the euro.’ ”

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