‘Italians Buy Italian Debt?’

In an commendable effort to contribute to solve the Nation’s crisis, Mr Melani, a private Italian citizen, bought some space on the Corriere della Sera to launch a national appeal “for Italians to buy Italian government bonds”. In order to evaluate the patriotic appeal, it is useful to remember a few facts. According to the Bank of Italy (May 2011), Italian banks and insurance companies hold approximately 43.6% of Italian outstanding public debt (in total 1.9 trillion Euros), while residents (households and businesses) hold 13.1% and non-residents 43.3%. Hence, in order to “Italianize” the debt, households should more than triple their holdings of debt, disbursing about 821.3 billion. Since the population (January 1, 2010), excluding foreigners, is about 56.1 million, each Italian, including babies, should pay up 14 thousand and 640 Euros. Quite a lot. Still this would not be sufficient, for the following reason. When passing an order to buy or sell in electronic markets it is very difficult to place constraints on the identity of the counterparty. In other words, I can decide to buy 14,640 Euros of government bonds at a given price/yield, but I cannot choose who to buy from. Hence families may end up buying all the debt held by Italian banks, without affecting the international exposure of the country. Already in the past (Argentine Bond, Cirio Bonds) Italian banks have proved only too quick in discharging junk bonds to their gullible depositors. Thus it’s no surprise that Mr Passera, the AD of Banca Intesa, has welcomed Mr Melani’s initiative. To be effective, the ‘”Italianization” should cover the entire debt stock held by Italian banks and insurance companies in addition to the foreign sector’s: each Italian should pay 28 thousand 172 Euros!