MNI: Italy Fears EU Retail Bond Could Sap BTP Demand-Officials

A proposal for a common market-based EU savings product or bond has been coolly received by Spain and Italy, with Rome concerned that its own retail issuance could suffer from the new competition, Italian and Spanish sources told MNI.

While Italy has always been in favour of joint borrowing initiatives, it would be less eager to see a pan-EU retail bond at a time when it is increasing its own retail issuance to offset declining bond purchases by the European Central Bank, sources from the Italian finance ministry told MNI.

“We want to keep a very low profile for now as we are very close to start the auction/issuance of the new BTP Valore and we don’t want any potential investors to lose interest,” a senior official said. (See MNI: France Backs Proposal For Joint EU Retail Bonds-Officials)

Italy will continue to favour joint borrowing plans, but is no hurry to proceed with any without detailed study, the official said.

The joint savings product proposal is contained within a draft paper prepared by European Union finance officials and is part of a package aimed at injecting new momentum into plans for Capital Markets Union, with support from countries including France, as well as to a lesser degree Germany. It will be on the table this weekend in Ghent where European finance ministers are also set to debate other aspects of Europe’s competitiveness challenges, together with former European Central Bank president and Italian prime minister Mario Draghi.

WAITING FOR DETAILS

A Spanish economy ministry official said that Madrid will wait to see details of the retail bond proposals as it has not been involved in their design.

“At the moment we are not going to take a position on this issue. Let's wait and see how the conversations develop,” the official said, adding that the link between potential retail bonds and completion of Capital Markets Union was not clear.

“Given the huge potential and how effective joint emission was in the Recovery Plan, there is no doubt that joint issuance will have a central role in Saturday’s discussion and in the following months,” the official said, referring to post-Covid borrowing under the NextGenerationEU plan. It is too soon to decide on details, the official said.

Italian and Spanish officials expect discussions on Capital Markets Union to lead to improved access to finance for small- and medium-sized businesses, and for a drive to direct more savings to investment.

“We need work on financial education to remove retail investors’ fear of the capital markets,” one of the officials said.

Draghi is set to give an update on the report on competitiveness which he is preparing at the request of the European Commission at the Ghent meeting, sources said.

It is also expected that the new European Investment Bank President Nadia Calvino will explains her strategy, which will include a push for investments in projects related with the digital and green transition and which enhance the EU’s open strategic autonomy, sources said.