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Rome’s new finance minister wants to sell China Italy’s debt

Giovanni Tria, the man whose recent appointment as finance minister was part of a bargain to avoid an election redo in Italy, has a plan to deal with Italy’s debt. Apparently, that plan may depend in part on China buying up Italian bonds, an idea he could propose during an upcoming trip to Asia.

Italy’s Corriere Della Sera reported as much this week, but noted that, despite relationships Tria built while living in China, it will not be an easy sell.

From Corriere:

“[Tria] has lived in China, speaks the language and has no intention of losing contacts in Beijing or Shanghai… because he understands that in a short time they could help him in a fundamental task that he has been responsible for since he was appointed Minister of Economy: dealing with approximately 400 billion [euros] a year in an orderly way, in terms that are acceptable to the tax payer…

“Tria has woven useful relationships in China since he was a university economist and keeps them. It seems probable – though not yet fixed on the agenda – that the minister will personally go to the Far East in the next few months precisely to explain to Asian investors why buying Italian Treasury bills today is worthwhile”

But, the article goes on, it is highly likely that contentious Italian politics and the radical policy proposals from the ruling coalition will get in the way. The mutant alliance between the far-left Five Star Movement (entitlement spending) and the right-wing League party (tax cuts) would have to be tamed to make Tria’s proposal attractive.

“The list [of budgetary pitfalls] is so long accounts cannot return. It is plausible that Tria suggests to M5S and Lega to review or spread over the years at least some promises, in the name of financial stability that remains very fragile.

“But then there is a second level, because the big investors in the debt that Italy needs do not just ask for returns. They also want stable prices, without surprises that constantly bring change, without the market returning to chaos because the Minister for European Affairs Paolo Savona talks about a “plan B” of leaving the euro, or because Deputy Prime Minister Luigi Di Maio implicitly accuses the Treasury executives of plotting ‘as vipers’ against the government.”

Tria has the credibility and the legal authority to endorse every budgetary measure, thus also to prevent choices that are too audacious and dangerous in the Law of Stability, Corriere notes.

But if the political forces push him out, the message to would-be investors is clear: imminent explosion risk.

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