ROME (Reuters) - The tiny state of San Marino, whose banks are crippled by bad debts, will decide by the end of the year whether to ask the International Monetary Fund for a loan of around 300 million euros (266.21 million pounds) and to start issuing bonds, its secretary of state said.
The state of 34,000 people landlocked inside Italy has yet to recover from a deep recession caused by the global financial crisis a decade ago. Its banks are swamped with bad debts of 1.7 billion euros — 117 percent of the former tax haven’s 2017 gross domestic product (GDP) of 1.45 billion euros.
Although San Marino is less than 15 km (9 miles) across, it still has six banks, a legacy of its days as a discreet place for foreigners, especially Italians, to park their savings.
San Marino’s central bank estimates that 37 percent of the nation’s problem loans are in its worst category of bad debts.
“We’ll define our plan for financial stability by the end of the year. It could envisage an IMF loan of around 300 million euros,” Secretary of State for Foreign Affairs Nicola Renzi told Reuters in an interview on Tuesday evening.
In addition to moving towards a loan request to the Washington-based IMF, the republic is also considering issuing sovereign bonds, something it has never done before.
“We are a state and we can well decide to do it in the framework of the stability plan,” Renzi said, stressing that San Marino was committed to keeping its debt, currently at around a quarter of the country’s output, below the 60 percent ratio.
Renzi said that state-owned Cassa di Risparmio di San Marino should merge with other lenders and rethink its business model.
Reporting by Giselda Vagnoni; Editing by Hugh Lawson