Meet the Mini-BOT: Italy Will Break Up the Eurozone

A crisis is brewing in the Eurozone and it's not even on mainstream media radar. Italy is at the center of the crisis.

BOT stands for Buoni Ordinari del Tesoro (Ordinary Treasury Bonds).

Mini means the denomination is smaller than the lowest denomination of regular treasury bonds, which is €1,000, thus "Mini-BOT".

The Italian government, led unofficially by deputy prime ministers Matteo Salvini (League) and Luigi Di Maio (Five Star Movement) both support the idea of a parallel currency.

The technocrat prime minister, Giuseppe Cont, is not calling the shots and threatened to resign over this issue.

ECB president, Mario Draghi, proclaimed “Mini-BOTs are either money and then they are illegal, or they are debt and then the stock of debt goes up. I don’t think there is a third possibility.

Possibility Three

A week ago, I noted possibility number three in Italy's Mini-BOT Trojan Horse Could Blow Up the Eurozone.

Possibility three is a Trojan horse designed as a stepping stone to get Italy out of the Eurozone.

Boiling Point

The Telegraph reports Italian Tensions Hit Boiling Point Over Plans for 'Currency' to Rival the Euro.

The two parties that make up the fractious governing alliance – the hard-Right League and the Five Star Movement – want to introduce a new type of government bond that would be used to pay off the state’s debts to companies and individuals.

Both the League and Five Star are deeply eurosceptic and have in the past mooted the idea of abandoning the common currency, with Matteo Salvini, the League’s combative leader, last year calling the euro “a mistaken experiment that has damaged jobs and the Italian economy".

The idea of introducing mini-BOTs has alarmed Europe, with Mario Draghi, the head of the European Central Bank, saying on Thursday that they would either amount to a parallel currency, in which case they would be illegal, or they would simply add to Italy’s towering debt.

He received support a day later from Vincenzo Boccia, the president of Confindustria, Italy’s employers’ federation, who said: “We are on the same wavelength as Draghi about the mini-bots because it would just mean more public debt."

“There’s a complicated game going on between the League, Five Star, the Quirinale (the residence of the president of Italy, Sergio Mattarella), ministers and the prime minister,” said Prof Giovanni Orsina, a professor of politics at Luiss University in Rome.

Showdown Coming Soon

A showdown is certain.

The timing is unknown, but it is sooner rather than later.

At the moment, France is also in breach of economic rules and there is this "little" thing called Brexit on the ECB and EU's mind.

So the EU will do what it always does, pretend there is no crisis and hope it goes away. But it won't.

Meanwhile, Italy wants to do this and will do this, but it would rather the EU trigger the event.

Path Set

Italy's budget is not close to meeting EU rules.The EU has threatened Excessive Deficit Procedures against Italy.

The EU will bush this aside debt targets for as long as it can, but the fate is sealed. The EU will either have to abandon its rules or fine Italy.

The upcoming fine and a spike in Italian bond yields will be the trigger for Italy to escalate the crisis with Mini-BOTs.

The longer the EU waits, the more time Italy has to prepare for the Mini-BOT launch.

I expect this to trigger within a year, and possibly months.

Italy is set to leave the Eurozone. The Mini-BOT is the transition mechanism. Few see it coming.

Mike "Mish" Shedlock

Comments (35)
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RonJ
RonJ

"A crisis is brewing in the Eurozone and it's not even on mainstream media radar."

Is it not on the mainstream media radar or is the MSM blocking the radar signal from public view? The MSM is propaganda.

RonJ
RonJ

"The EU will bush this aside debt targets for as long as it can, but the fate is sealed. The EU will either have to abandon its rules or fine Italy."

The thing about pegs is that eventually they are broken. The dollar is no longer pegged to gold, either. Question is, how does one meet rules if they have never been followed?

KidHorn
KidHorn

Time for DB to move their Italian bonds to the bad bank.

Mish
Mish

Editor

"I am a bit confused also. this minbot , i assume will be pegged to the euro ? will it be convertible ? devils in the details."

Not pegged to the Euro I do not believe. Italy cannot mandate acceptance either. But It will issue them and accept them as payment for taxes (just not taxes owed in euros). By accepting them as taxes - for payments and transactions in the minibot, they guarantee acceptance.

How does it work? Government pays some state employees in them instead of euros.

berreg
berreg

Do you think that people, italian Savers (League's voters are mainly from the rich North) will forgive Salvini that they are taken back to the previous centurty, being much poorer? This is nonsense, it can't happen. If Salvini does this, he is lost.

berreg
berreg

Not to mention that everyone, the whole country will be much poorer suddenly, if they quit the eurozone. What about italian savers? If i would be italian, when hearing these news, ideas, i would take out my money from italian banks and put them to rich North, core eurozone.

berreg
berreg

So OK? maybe it was a mistake for Italy to join the eurozone in 2002, but now, as they have joined, it would be crazy harmful to quit. Now as they have joined, staying in the Eurozone is the only way if they dont want again continous devaluations. so what is the only way? what a reasonable politican, who is responsible would do? Lessen corruption, competitiveness, what Finland has done in the 90s.. This is the only way. Otherwise, the nice, shining italiy will be a poor noman's land and the north will get as poor as the south also. Instead of, they should have a very strict, (like the Finnish did) monetary policy and they should have responsible politicans.

berreg
berreg

And a final thing: Even if i doubt that Italy could leave the eurozone in short-term, i would thinkt that even for Salvini's comments, a reasonable Italian saver would have to move out his savings from Italy. why it doesn't happen? Why the italian's are not aware ? Or why the market doesn't punish for Salvini's comments for the mini-bot?

Maximus_Minimus
Maximus_Minimus

The Mini-BOTs cannot be any worse than the central banking fiat. Bring it on!

Hansa
Hansa

I'll bet 250,000 lire (once $35) this goes nowhere.

Menaquinone
Menaquinone

Italians have been debasing the currency since the year one AD. After WWII Italy debased the lira roughly ten percent every year for twenty years with a "surprise" reset. As recently as 1960 European tourists entering Italy could change money to Lira on their first stop. Come to stop for lunch in another town and the money was no good in that town. Many Italian towns had their own currency because it was more sound than the Roman Lira. Italians know everything there is to know about renigging debt and debasing currency. Most humorous is German banks holding Italian debt.

What do you call a German bank holding $50 Billion of loans to Italy, France, Spain, and Greece? Answer: Deutsche.

Eddie Coyle
Eddie Coyle

You basically have "second world" countries Italy. Greece, Spain, Portugal...that have climbed on board for First world welfare benefits, work weeks, etc. NOTHING in their economies would suggest they could afford this on their own. It's unsustainable.