Italys alternative cash plan to raise scepticism

Tuesday 22 May 2018 09:27 CET | News

Italy’s would-be government has proposed to pay its bills by issuing small-denomination bonds that would work as a form of parallel currency.

However, a European Central Bank official expressed scepticism regarding this proposal, according to online publication US News. Under a government accord published on May, 18, Italy’s two anti-establishment parties said the government could pay debt it owes to companies and individuals by issuing bonds that can be traded, known in market parlance as IOUs.

The ECB has made no comment on the proposal, which could be deemed in breach of EU rules giving the central bank exclusive power to issue currency in the euro zone. However, going beyond legal objection, a senior ECB policymaker speaking on condition of anonymity said any such IOU, branded MiniBOT after the Italian Treasury bill, would not work, as this form of parallel currency was unlikely to be widely accepted.

MiniBOTs could increase purchasing power but their success will depend on how many shops are prepared to accept them as a means of payment, according to Italian economists cited by the online publication. Still, Italians would be able to use these IOUs to pay back the government, for example through taxes or fines.

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Keywords: small denomination bonds, currency, euro zone, Italy, IOU, alternative payment methods, MiniBOT
Countries: World