Paper Money

Italy considers alternative currency as its debt rises

Italy has endured 61 governments since the end of World War II, averaging one every 11 months. The only constants have been political and often economic instability. Many thought the adoption of the euro in 2001 would solve the latter problem, but Italian governments have constantly overspent, and the country’s €277 billion national debt is 144 percent of its gross domestic product, and it has zero growth and is facing European Commission fines of €3.5 billion as a consequence of its overspending.

The current Italian government’s solution: A parallel currency called “minibots,” or mini bills of treasury, that could be issued in values from €1 to €50 for use only inside the country alongside the euro. They are described as akin to “treasury notes” bearing no interest rate or maturity date. A proposal in the Italian Senate says they could be used by the government to pay the arrears it owes to commercial businesses, and by citizens to pay their taxes. They could also be used by the government to pay social benefits. Private businesses would not have to accept them, but could if they wanted to. 

Eurozone objections

Critics say the minibots, as an illegal parallel domestic currency, would undermine Italy’s membership in the European Union, and facilitate its departure from the eurozone by leaving it in breach of its treaty obligations. Lorenzo Codogno, a former chief economist at the Italian Treasury said, “A legal tender can only be made by law, but this would contravene the treaty on the euro.” The Bank of Italy disagrees because “since it would not be legal tender, it would not violate the provisions of the European treaties regarding money issuance.”

Other critics pointed out that if the minibots are not legal tender, their use would have the reverse of their intended effect and actually increase the national debt. The only legislative proposals so far have been in a nonbinding parliamentary vote that unanimously endorsed the concept, reports the New York Times in a news article.

Claudio Borghi, a euroskeptic and economic adviser to the right-wing League Party, issued a brochure, “Mini Bot, Sovereignty and Democracy,” showing proposed designs far different from the bland neutrality of the euro bank notes. The backs feature Italian cathedrals and other historic buildings. Some of the faces may be controversial, as they are dedicated not just to cultural figures, such as musician Arturo Toscanini, but also to anti-Islamic journalist Orianna Fallaci, a duo of famous anti-mafia prosecutors, a soccer star, a poet, judges, and politicians of various levels of repute.

Bloomberg reported on June 15 that another parallel currency, the old Italian lira, is already circulating in Italy, at least among its domestic criminal enterprises. It says that the police find that even though the lira stopped being legal tender in February 2002, it is still being used for illegal transactions. This is even though they are no longer redeemable, even at the Bank of Italy. 

A representative of the national financial police is quoted as saying at a parliamentary hearing, “We still discover big amounts of liras,” and that they “still constitute parts of illicit transactions.’’ He added, “When a banknote is accepted by an organization internally, even if it is outside the law as a legal value, it can settle transactions. We are obviously talking about illicit organizations.”

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