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MNI (London)
--A Quarter Of Entire Debt Could Be Cancelled Overnight
--Measure Not Exclusive To Italy, Extended To All Member States
--If ECB Wants To Help, This Is The Best Way
By Silvia Marchetti
     ROME (MNI) - If the European Central Bank really wants to help Italy cut
its elevated debt, it should cancel the amount of government securities bought
through the asset purchase programme, a senior Lega official told MNI in
exclusive comments.
     "It's very simple. If the ECB wants to reduce our debt, we will give it
permission to scrap all Italy state bonds that it has purchased during
quantitative easing. Immediately, our debt would decrease without causing
problems for anyone," said Claudio Borghi, Lega's financial spokesman and newly
elected deputy. 
     Borghi argued that given Italy's outstanding debt, currently at E2.3
trillion, a total of roughly a quarter -- over E400 billion -- would be in the
hands of the ECB by September and it could be automatically rendered "null and
void", significantly curbing the level of Italy's indebtedness. 
     Last week, in its regular bulletin the ECB, warned Italy, alongside other
debt-ridden European peers, to boost fiscal adjustment efforts now, before the
window of opportunity offered by the accommodative monetary policy shuts down. 
     Borghi dismissed Frankfurt's warnings, dubbing them the usual "alarmist
reprimands". Instead of spreading panic and telling member states what they
should or should not do, the ECB could do a lot in really helping countries
adjust their public finances. 
     "It's like when you have a promissory note and it reaches its expiration,
instead of asking for us to reimburse the govvies, the ECB cancels them, wiping
out a quarter of our debt at once". 
     Bolstered by picking up nearly 20% of vote in the March 4 election, Lega is
now the biggest stakeholder in the centre-right coalition that won around 37% of
the overall vote. 
     Now Italy's third-largest party, behind the 5 Star Movement and the
Democrats, chances are high that it will play a major role in the formation of
the next government.
     Asked whether other member states, primarily Germany, would be happy to
share the burden of paying for Italy's debt, Borghi said the measures to
eliminate debt held by the ECB would not be exclusive to Italy but extended to
all member countries. 
     "All countries will agree, as the ECB would be cancelling QE-purchased
govvies not just for us, but for all members, with a positive repercussion on
the union's outlook," he said.
     "I see no problem at all. This would make everyone happy. Scrapping all
APP-linked securities would contribute in significantly lowering the whole
eurozone's debt," he said. 
     Lega's ultimate goal however remains exiting from the euro, Borghi
stressed. This could however happen in two ways: the euro could naturally
"implode", collapse by itself, or if a Lega-led government with sufficient
support is formed to leave the euro bloc.
     But for now, Borghi says, while Italy remains with the eurozone, it would
be appropriate if the ECB extended its asset-purchase program well beyond its
expected termination date of September. And not just because it would continue
to buy Italian debt.
     "It is best to reach inflation levels that are more than optimal before
ending the APP," he said.  
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MFIBU$,M$E$$$,M$I$$$,M$X$$$,MC$$$$,MI$$$$,MX$$$$,M$$EC$,MFX$$$,MGX$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com