In the last four years the share of Italian public debt in the hands of the ECB has almost doubled, going from 17% in 2019 to 29% expected for the end of this year (equal to 22,5 and 42,1% of GDP respectively). And that's not all: in the future the percentage could increase even more. To make the calculations is the Observatory on the Italian public accounts of Carlo Cottarelli, which in a recent article points out how, between 2020 and June of this year, the European Central Bank has purchased Italian public debt securities for 363 billion euros, of which 279 through the Pepp (the program linked to the pandemic emergency which ended last March) and 84 under the App (the ordinary purchase program suspended from XNUMX July).
The structure led by Carlo Cottarelli then points out that this trend could even strengthen in the near future for two reasons.
The reinvestments of the ECB
Firstly, the ECB is already reinvesting the funds collected upon maturity of the public bonds it has in its belly: for those purchased under the PEPP, reinvestments will continue at least until 2024; for those linked to Apps, on the other hand, they will continue "for an extended period of time" starting from July 21, the date on which the interest rate hikes began. It is important emphasizes that Frankfurt is carrying on reinvestments flexibly, i.e. allocating them mainly to government bonds of countries perceived by the markets as more vulnerable, starting with Italy. The CPI Observatory estimates that in the two-year period 2020-2021 the ECB renewed Italian bonds for 120 billion and that it will renew another 88 by the end of 2022.
Tpi: the new anti-spread shield
Furthermore, the Eurotower could forfeit further shares of the Italian public debt through the new anti-spread shield. It's called the Transmission Protection Instrument (Tpi) and provides for purchases of government bonds without previously established limits. The purpose is limit speculation public debt markets and thus safeguard the correct transmission of monetary policy measures throughout the Eurozone. “For example – explains the Observatory – when the Central Bank adopts a restrictive monetary policy, the financing conditions of businesses and households should deteriorate uniformly in the countries of the euro area”. However, to benefit from the shield countries will have to comply a number of conditions, such as compliance with the indications of the European Commission on the reforms to be launched and the implementation of the Pnrr on schedule.
Less Italian public debt on the market
Based on these considerations, the CPI Observatory concludes that, "while the total public debt" of Italy "at the end of the year should settle at 147% of GDP (Def forecast), the debt held by the market should settle at around 105% , down from 112% in 2019”.
