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Italy revives 'alternative currency' proposal

Section: Daily Dispatches

By Davide Ghiglione and Valentina Romei
Financial Times, London
Wednesday, June 5, 2019

Debate is growing in Italy about the suggestion that a new domestic currency could be introduced by the government to pay its debts -- and the possibility that Rome's Eurosceptic coalition might use it to facilitate the nation's departure from the euro.

Prominent members of deputy prime minister Matteo Salvini's ruling League party have floated the proposal -- which was endorsed by a vote in the Italian parliament last week. But how would it work, and how likely is it to happen?

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The Italian government should issue debt in small denominations that can change hands as a medium of exchange -- that, at least, is the view of key advisers to Mr Salvini.

Claudio Borghi, one of the League's most influential economic advisers, has championed the idea, as has Alberto Bagnai, president of the finance committee in Rome's Senate. Mr Borghi, who has been strongly critical of Italy's membership of the single currency, is president of the budget committee in the lower house of Italy's parliament.

The proposal involves creating a new type of Treasury bill -- dubbed mini-bills of Treasury (mini-BOTs) -- which could be used by the government to pay the arrears it owes to commercial businesses, and by citizens to pay their taxes, Mr Borghi has suggested.

Thus it would have the scope to grow into what would in effect be a parallel domestic currency, separate from Italy's official currency, the euro. ...

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