Eurozone crisis live: Italy denies wrongdoing over derivative contracts

Euro DiceItaly is reportedly facing losses of around €8bn on controversial derivative contracts taken out in the late 1990s, and restructured at the height of the eurozone crisis.

Confidential government papers seen by the Financial Times suggest the Italian Treasury is sitting on an €8bn loss after restructuring eight debt contracts with foreign banks in early 2012, at what appear to be poor terms.

The FT explains that the 29-page report is fascinating both for what it shows, and what it doesn’t:

While the report leaves out crucial details and appears intended not to give a full picture of Italy’s potential losses, experts who examined it told the Financial Times the restructuring allowed the cash-strapped Treasury to stagger payments owed to foreign banks over a longer period but, in some cases, at more disadvantageous terms for Italy.

The report does not name the banks or give details of the original contracts – questions that worried the state auditors – but the experts said they appeared to date back to the period in the late 1990s. At that time, before and just after Italy entered the euro, Rome was flattering its accounts by taking upfront payments from banks in order to meet the deficit targets set by the EU for joining the first wave of 11 countries that adopted the euro in 1999….more

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