Financial support for Italy will be costless

John Whittaker

MPRA Paper from University Library of Munich, Germany

Abstract: Loans to Italy from other eurozone countries will not increase their risk exposure, irrespective of the method of financing. This is because loans will displace an equal amount of Italy’s Target2 debt, leaving unchanged the total claim of the eurozone creditors. Italy currently has Target2 debt of €513bn to other eurozone countries through its central bank. If Italy receives grants, this will amount to forgiveness of some of its Target2 debt, which will be no loss to the creditors because its Target2 debt is unlikely ever to be repaid at full value.

Keywords: Target2; eurosystem; Italian debt; recovery plan; ECB (search for similar items in EconPapers)
JEL-codes: E42 E58 F33 F34 (search for similar items in EconPapers)
Date: 2020-06-10
New Economics Papers: this item is included in nep-mac and nep-ore
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