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Italy was urged by the European Central Bank to rethink a push to declare its gold reserves the property of its people, a move critics say could open the door to the government selling off bullion.
In a legal opinion dated Tuesday, the Governing Council asked Premier Giorgia Meloni’s government to review the proposal following a request from Rome for officials in Frankfurt to study the matter.
“The Italian authorities are invited to reconsider the draft provision, also with a view to preserving the independent performance of the basic ESCB-related tasks of the Banca d’Italia under the Treaty,” the ECB’s policymakers said.
The Bank of Italy holds about 2,452 tonnes of gold, the third-largest stash after the US and Germany. Following recent price gains for bullion, some lawmakers in Meloni’s center-right party proposed an amendment to the country’s upcoming budget which confirms that the reserves are managed and held by the central bank but “belong to the Italian people.”
“It is not clear to the ECB what the concrete purpose of the draft provision is,” the Governing Council said.
The amended proposal has left both economists and central bankers perplexed as the gold is already the property of the Italian state, and therefore of Italians. At current market prices, it’s worth over €280 billion ($327 billion).
The issue seems to be that the bullion is held by the central bank, which is a public institution independent of the government as required by Italy’s membership of the euro. Ministers therefore can’t freely dispose of some reserves in the way that the UK sold off about half of its own stash under Tony Blair’s government, starting in 1999.
“The problem with this amendment is that it violates European treaties,” former Bank of Italy Director General Salvatore Rossi said in an interview. “Approving it as Italian law means opening up a huge battle with European institutions, and I wonder politically whether this is a good idea.”
Meloni’s Brothers of Italy party has periodically raised the issue of political control over the country’s reserves, and the far-right League party had proposed giving the state control over its gold back in 2019. At the time, the ECB responded that it was against European Union treaties.
“We go full circle since 2019, it hasn’t changed at all,” ECB President Christine Lagarde said Wednesday. “From a bookkeeping point of view, from a management point of view, from a distribution-of-results point of view, it is Banca d’Italia which has full authority.”
Speaking to European lawmakers in Brussels, she stressed that “Banca D’Italia has the duty to hold and manage those reserves.”
Growth struggles
The conversation over gold is one linked to deeper questions about Italy’s growth trajectory and future fiscal plans. The economy is forecast to expand only 0.5% this year, by the government’s own reckoning, and its debt remains well above 130% of economic output, making it difficult to spend either to help its citizens or boost growth.
Meloni has managed to put tax cuts for the middle classes in the latest budget which is scheduled to be approved by year-end. She and Finance Minister Giancarlo Giorgetti have been praised for their fiscal efforts, which have brought the deficit down to the EU’s 3% ceiling.
Just this year, Italy has earned four upgrades from ratings assessors used by the ECB to gauge collateral. Investors have rewarded the country by narrowing the yield spread between Italian 10-year bonds and equivalent German bonds to well below 80 basis points.
But the road ahead seems more complex. The EU’s recovery fund program, which has helped keep the economy up through investment in infrastructure and other projects, is winding down. Meanwhile global trade tensions are persisting.
That has pushed politicians to look for other options to help buoy its fiscal position, from common EU debt to tapping the country’s gold reserves.
About half of Italy’s bullion is to be found under a palm-lined street in central Rome in the Bank of Italy’s vaults. Most of the rest is located in the US, while further small portions are in the UK and Switzerland.
“Gold remains a guarantee, a form of security which boosts stability, and any country thinks 30 times before selling a piece of gold because it would send a bad signal — as if saying to the world that I am selling my last resource, that I’m at the end of the rope,” said Rossi. “That’s not a signal you want to send to markets.”
(By Alessandra Migliaccio)