EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 3 February 2005 
at the request of the Italian Ministry of Economic Affairs and Finance  
on a draft law amending Law Decree No 7 of 25  January 1999, as converted by Law No 74 of 
25 March 1999, concerning urgent provisions on Italian participation in the International 
Monetary Fund’s interventions to confront severe financial crises of  its member countries 
(CON/2005/1)  
 
1. On 22 October 2004 the European Central Bank (ECB)  received a request from the Italian Ministry 
of Economic Affairs and Finance for an opinion on a draft legislative proposal amending Law 
Decree No 7 of 25 January 1999, as converted by  Law No 74 of 25 March 1999 (hereinafter the 
‘Law Decree’), concerning urgent provisions on Ita lian participation in the International Monetary 
Fund’s interventions to confront severe financia l crises of its member countries (hereinafter the 
‘draft law’).  
2. The ECB’s competence to deliver an opinion is based on Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions1, as the draft law contains provisions concerning a 
national central bank (NCB). In addition, the ECB notes that its role under Article 237(d) of the 
Treaty of ensuring that NCBs fulfil their obligations thereunder2, which includes ensuring that they 
comply with the prohibition on monetary financin g laid down in Article 101, makes it necessary to 
ascertain whether the draft law is compatible with  this prohibition. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedur e of the European Central Bank, the Governing 
Council has adopted this opinion.   
3. Article 1(1) of the Law Decree currently authori ses the Italian Ministry of Economic Affairs and 
Finance to guarantee the repayment of principal a nd interest and cover any exchange rate risks on 
credit lines extended by the Banca d’Italia to the International Monetary Fund (IMF) member 
countries that respect the conditions of the adju stment programmes approved by the IMF, when 
                                                      
1  OJ L 189, 3.7.1998, p. 42. 
2 See also Recital 9 of Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the 
application of the prohibitions referred to in Articles 104 and 104b(1) of the Tr eaty, OJ L 332, 31.12.1993, p. 1, which 
provides that notwithstanding the role assigned to the Commi ssion pursuant to Article 169 of the Treaty, it is for the 
ECB, pursuant to Articles 109f(9) (now 117(9)) and 180 (now  237) of the Treaty, to ensure that NCBs honour the 
obligations laid down by the Treaty.   
 
2 unforeseen circumstances require financial resources additional to those provided by the latter, up 
to a cumulative limit of ITL 2 500 billion (appr oximately EUR 1,29 billion), which is the total 
amount of the possible interventions under that Ar ticle. It should be noted that the Law Decree was 
not submitted for consultation to the ECB at th e time of its adoption. The present consultation 
refers only to the draft law. The latter would ame nd the Law Decree to the effect that the Ministry 
of Economic Affairs and Finance would be auth orised, within the abovementioned cumulative 
limit, to guarantee the repayment of principal and interest and cover any exchange rate risks on 
credit lines extended by the Banca d’Italia to the Lebanese Republic, in respect of an amount not 
higher than EUR 200 million.  
4. In the explanatory memorandum accompanying the draft law it is explained that on 23 November 
2002 an international conference was held in Pa ris to support Lebanon’s economic adjustment 
programme, which was convened by the President  of France and attended by representatives of 
various EU and non-EU countries, the IMF and the World Bank. On that occasion, the Italian Prime Minister pledged to provide EUR 200 million to support Lebanon’s efforts in the context of 
the stabilisation process of the Middle East. 
5. The explanatory memorandum states that the dr aft law is required since Lebanon does not have a 
standard financed programme in place with the IMF. It further notes that the draft law is considered 
to be appropriate since (a) Lebanon is a memb er of the IMF and has a regular relationship 
therewith; (b) the IMF welcomed Lebanon’s effort s and the support of the international community 
at the Paris conference; and (c) the IMF confirme d its willingness at the said conference to closely 
cooperate with the Lebanese authorities. The explanatory memorandum then states that, from a fiscal point of view, the draft law (a) does not have  an impact on the Italian national budget since it 
provides for a contingent liability within pre-appr oved limits; and (b) would not have any impact 
on the Italian Government’s budget even if the fu nding was provided by the latter since as a credit 
it would be a financial item which would not a ffect Italy’s net borrowing according to EU 
accounting rules. Finally, it states that the Banca d’Italia’s balance sheet and profit and loss account 
‘are completely covered by the full guarantee of the Ministry of Economic Affairs and Finance’. 
6. The ECB understands that the draft law concerns a limited financial commitment entered into by 
Italy to provide support to a country that is emerging from a troubled period in its history. 
However, the draft law must be examined as to its conformity with the abovementioned prohibition 
on monetary financing, contained in Ar ticle 101 of the Treaty, which prohibits, inter alia , overdraft 
facilities or any other type of credit facility w ith the NCBs in favour of central governments. 
Already in 1993 the Committee of Governors of th e central banks of the Member States of the 
European Economic Community noted that this pr ohibition is of ‘essential importance’ to ensure 
that ‘monetary policy [is not] hindered in the pursuit of its primary objective of price stability. Furthermore, central bank financing of the public  sector lessens the pressure for fiscal discipline’
3. 
                                                      
3  Letter to Commission President Delors of 20 April 1993.  
 
3 Therefore, this prohibition must be interpreted in  a strict manner, subject only to certain limited 
exemptions contained in Article 101(2) of th e Treaty and Council Regulation (EC) No 3603/93. 
Article 1(1) of that Regulation provides that ‘any  financing of the public sector’s obligations vis-à-
vis third parties’ is a ‘type of credit facility’ which is prohibited by Article 104 (now 101) of the 
Treaty. The Regulation also contains a number of limited and explicit exemptions from the 
prohibition on monetary financing. In particular, Article 7 provides that ‘The financing by the … 
national central banks of obligations falling up on the public sector vis-à-vis the International 
Monetary Fund … shall not be regarded as a credit facility within the meaning of Article 104 of the 
Treaty’. Recital 14 sets out the rationale behind this  exemption, stating that it is appropriate to 
authorise the financing by the central banks of obligations falling upon the public sector vis-à-vis 
the IMF as this financing results in foreign clai ms which have all the characteristics of reserve 
assets.  
7. It is stated in the explanatory memorandum that under the draft law credit lines would be extended 
by the Banca d’Italia to Lebanon to fulfil the It alian Prime Minister’s co mmitment to provide EUR 
200 million to support that country. Therefore, the pu rpose of the draft law may be considered as 
authorising the ‘financing of the public sector’s obligations vis-à-vis third parties’ which is 
prohibited by the abovementioned Article 1(1) of  Regulation (EC) No 3603/93. It is therefore 
crucial to determine whether the draft law falls within the scope of the exemption contained in 
Article 7. More specifically, the legal question to  be clarified is whether the Banca d’Italia’s 
extension of credit to Lebanon can be characterised as its financing of an obligation of the Italian 
State ‘vis-à-vis the IMF’. Although the ECB unders tands that the IMF takes a favourable view of 
the international community’s support for Le banon, it notes that Lebanon does not have any 
financial assistance programme in place with the IM F. The fact that the draft provision constitutes 
an amendment which will be introduced into an act entitled ‘Urgent provisions on Italian 
participation in the [IMF’s] interventions to confront severe financial crises of its member 
countries’ does not affect the nature of the obliga tions it concerns. The available facts, including 
the provisions of the draft law itself identifying Lebanon as the direct beneficiary of the financing in question, indicate that the Italian Governme nt’s commitment to Lebanon does not derive from 
any obligation of the Italian State vis-à-vis the IM F, including an IMF-administered mechanism. It 
is also clear that the extension of a credit line to  Lebanon by the Banca d’Italia would not result in 
any claim on the IMF. Therefore this financing sh ould not be considered as a fulfilment of any 
obligation towards the IMF and the Article 7 ex emption cannot be invoked to allow for Banca 
d’Italia’s proposed financing of Lebanon as set out in the draft law. In addition, it would appear 
that the credit lines to be extended by the Banca d’ Italia to Lebanon would be denominated in euro. 
Such a euro-denominated loan w ould not have the characteristics of a reserve asset, as mentioned 
in Recital 14. In conclusion, the extension of a credit line by the Banca d’Italia to Lebanon under 
the draft law would thus breach the prohibition on monetary financing contai ned in Article 101 of 
the Treaty. 
 
4 8. This opinion will be published on the ECB’s website  upon formal presentation of the draft law to 
the Parliament by the Italian Government. In any event , this opinion will be published at the 
latest six months after the date of its adoption. 
  Done at Frankfurt am Main, 3 February 2005. 
 
[ signed ] 
 
The President of the ECB 
Jean-Claude TRICHET