June 24, 2019 / 7:57 AM / a month ago

Mini-bill plan creates fissures within Italy's League

MILAN (Reuters) - A controversial plan for Italy to issue so-called mini-bills to settle overdue state payments is opening cracks within the country’s ruling League party, after a prominent party official on Sunday dismissed it as “unrealistic.”

FILE PHOTO: Italy's Undersecretary for Prime Minister Giancarlo Giorgetti arrives for gala dinner at the Quirinal palace in Rome, Italy, June 1, 2018. REUTERS/Remo Casilli

Mini-bills, or mini-BOTs, are small-denomination versions of the Buoni Ordinari del Tesoro, Italy’s treasury bills. They are the brainchild of Claudio Borghi, a eurosceptic economist who chairs Italy’s Budget Committee. Similar to IOUs, they would be used to pay off suppliers, who are owed billions of euros.

The League included a plan to issue mini-BOTS in the government pact agreed last year with its coalition partner, the 5-Star Movement. Discussions about using the bills has grown in recent weeks following a parliamentary motion to introduce them.

That has unnerved investors. In effect, the bills would be a kind of currency, which means they could be a first step towards calling into question the euro.

Both European Central President Mario Draghi and Italian Economy Minister Giovanni Tria have rejected the bills. They say using them to settle payments would either be illegal, because they would form of parallel currency, or would simply inflate Italy’s already high debt.

The League had so far stood by the idea, with party chief Matteo Salvini saying he was open to considering alternative tools only if somebody came up with a better idea.

But Cabinet Undersecretary Giancarlo Giorgetti, who is close to Salvini, on Sunday backed away from previous comments which had described mini-BOTs as “a possibility.”

“Is there still someone who believes what Borghi says? Do you reckon mini-bills are realistic? If they were feasible, then everyone would be using them,” Giorgetti told reporters in Lausanne, according to Italian media.

The Italian press speculated Giorgetti’s change of mind over mini-BOTs could be linked to his ambition to take on a job as European commissioner.

Borghi in turn said that Giorgetti was joking and his words had been misinterpreted, according to reports in two Italian newspapers on Monday.

Borghi told Corriere della Sera online that he spoke often with Salvini, who had not told him he had “any doubts or wish to ditch one of our landmark projects.”

Reporting by Valentina Za, editing by Larry King

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