Italy warned over securitization

BRUSSELS (Reuters) – Italy faces a serious risk of being barred from using some of its income from securitization to offset its public budget deficit, EU Economic and Monetary Affairs Commissioner Pedro Solbes said yesterday. Italy has sold bonds backed by the future sale of public property and others backed by revenues from the state lottery in order to reduce its deficit amid concern about its compliance with the EU’s stability pact, which bars countries from running deficits of more than 3 percent of gross domestic product. Earlier this month, the Bank of Italy said a ruling against the inclusion of all securitization income would increase Italy’s 2001 budget deficit to just under 2 percent of gross domestic product, up from a previously calculated 1.4 percent. Official figures show Italy’s net debt in 2001 was reduced by 0.3 percent by income from real estate securitizations and by 0.25 percent from lottery securitization revenue. Securitizations have been used as a fiscal tool by four other EU countries, but Italy is the only one of those which is running a deficit. «The experts are discussing this, but it is too soon to decide,» Solbes told reporters. However, he said there was a «maximum of potential risk» that European statistics agency Eurostat would rule in July against the use of income from the securitization of real estate assets and the national lottery system to ease deficits. «The problem from a statistical point of view is that not all securitizations are the same,» Solbes said. An Italian Treasury source said yesterday that Eurostat’s review applied mainly to Italy’s securitization of lottery revenues, adding that its real-estate asset securitization was less controversial. «They don’t seem to be arguing with the real-estate securitization, while the lottery case is more complicated, in that it involves future proceeds,» the source said. In addition to Italy – the eurozone’s number three economy – public accounts in Austria, Finland, Greece and Ireland could also be reviewed depending on Eurostat’s decision on the securitizations issue.