Inside the €18 billion Italian job
Italy is profoundly caught up in the eurozone crisis, but unlike its peripheral peers, which remain hostage to the international bond markets, the country is able partly to fund its colossal public debt by drawing on formidable and passionate support at home. Could its eurozone peers do the same?
Most of the records that have been broken in the eurozone during the past few years make for depressing reading, but one that was well and truly smashed by the Republic of Italy in October at least provided the Italians with some cheer.
On October 18 the Ministero dell’Economia e delle Finanze completed its new programme for 2012 of issuing four-year inflation-linked bonds – Buono del Tesoro Poliennali Italia (BTPi) – in style by selling the single-biggest bond ever.
At just over €18 billion, Italy’s bond not only broke the previous records of £8 billion by the UK in 2010 and €8 billion by Greece in the same year, but trumped them in such a way few would publicly admit was ever possible.
It’s a striking achievement on many levels, and not least because in the eyes of many foreign institutional investors Italy is an acute concern because of its high and almost Greek-style ratio of public debt to GDP.
Throw in a deepening recession compounded by crippling rigidities in Italy’s economy, and a political class often seen to be more entertaining than effective, and there are good reasons why foreign investors are wary of Italy.