EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 21 February 2008 
at the request of the Italian Ministry of Economic Affairs and Finance  
on some provisions of the Law on the State annual and pluriannual budget (2008 Budget Law) 
(CON/2008/10) 
 
Introduction and legal basis  
On 20 December 2007 the European Central Bank (ECB)  received a request from the Italian Ministry of 
Economic Affairs and Finance (MEF) for an opinion on some provisions of the draft law on the composition of the State annual and pluriannual bu dget (hereinafter the ‘2008 Budget Law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third indent of 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 
provisions
1, as the law relates to the Banca d’Italia. In accordance with the first sentence of Article 17.5 
of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion. 
The Italian Council of Ministers approved the draft law on 15 November 2007 and the national 
Parliament adopted it on 24 December 2007 as Law No 2442. The subject of this opinion is the draft 
version of the law that the consulting authority sent to the ECB with its consultation request ( Atto 
Camera 3256 – A), which was agreed by the Parliament only shortly before its adoption and corresponds 
fully to the final text that was adopted. This opinion  relates only to the specific provisions identified by 
the consulting authority as relevant for the ECB. 
 1. Purpose of the relevant provisions of the 2008 Budget Law 
The specific provisions on which the MEF has consulted th e ECB affect the role of the Banca d’Italia as a 
national central bank (NCB) of the Eurosystem a nd cover two different fields. On the one hand, 
Article 2(39) of the 2008 Budget Law implements a struct ural reform to the government account held at 
the Banca d’Italia by amending the  Law on consolidation of legislativ e provisions and regulations on 
public debt (hereinafter the ‘2003 Consolidated Law’), which regulates the single Treasury account
3. On 
the other hand, Article 3(44) to (49) of the 2008 Budg et Law relates to the overall financial treatment of 
the Banca d’Italia. According to Article 3(45), the regulation of the financing modalities, expenditure 
control and remuneration of the Banca d’Italia w ill be delegated to a future law reforming the 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Gazzetta Ufficiale  No 300, 28.12.2007, Supplemento  ordinario No 285 . 
3  Presidential Decree No 398 of 30 December 2003 ( Gazzetta Ufficiale No 57, 9.3.2007, Supplemento ordinario) . 
2 independent authorities in Italy, including the Banca d’It alia. In this regard, it may be noted that the ECB 
has already opined earlier last year on a draft law reforming the independent authorities ( Atto 
Senato 1366)4. 
 2. General observations The ECB received the consultation request in the same week in which the law was adopted. The ECB 
understands that on 31 December 2007, shortly afte r adoption of the law, Decree-Law No 248 on the 
extension of deadlines set by legislative provisions and urgent provisions on financ ial matters (hereinafter 
the ‘Decree-Law’ ) was adopted
5. According to Article 42(1) of the Decree-Law, Article 2(39) of the 
2008 Budget Law only enters into force following th e adoption of the relevant ECB opinion, while 
Article 42(2) of the Decree-Law adds to Article 3(45) of the 2008 Budget Law the words ‘in compliance 
with the requirements provided for by Community law’  after the words ‘on the expenditure’. In view of 
these provisions of the Decree-Law and the late stag e in the legislative process at which the ECB was 
consulted, the ECB would like to draw attention to Article 4 of Council Decision 98/415/EC, which 
requires Member States to ensure that the ECB is cons ulted at an appropriate point in time to allow the 
consulting authority to take its opinion into consider ation before deciding on the substance of the draft 
legislative provisions. In the present matter, the ECB was consulted more than one month after approval 
of the draft Law by the Government and two working da ys before its final adoption by Parliament. On the 
other hand, the ECB appreciates that  the consulting authority will take appropriate additional measures to 
reflect the ECB’s opinion to the extent appropriate . In addition, the ECB expects that for future 
amendments or implementing measures to the law, th e obligation to consult the ECB is respected. More 
generally, internal administrative procedures should be in place to ensure that timely consultation of the 
ECB is foreseen whenever such consultation is mandatory. 
 3. Specific observations 3.1 Publicity and transparency One aspect of Article 3(44) of the 2008 Budget Law is the application to the Italian public institutions of 
the general principles of publicity and transparency of the remuneration of public administration servants. 
These principles promote best practice in public admini stration and the ECB welcomes the fact that they 
apply to the Banca d’Italia, in addition to  the other Italian independent authorities. 
3.2 Central bank independence – Personal independence  
3.2.1 Article 3(44) of the 2008 Budget Law also establis hes limits to the ‘overall level of remuneration’ 
for anyone receiving payment from public finances within the scope of employment or self-employment contracts with the public administ ration and exempts the Ba nca d’Italia from the 
scope of this general rule. However, Article 3( 46) of the 2008 Budget Law provides for a specific 
                                                 
4  See ECB Opinion CON/2007/17 of 18 June 2007 at the request of the Italian Ministry of Economic Affairs and Finance 
on a draft law on the regulation and supervision of markets a nd the functioning of the competent independent authorities. 
5  Decree-Law No 248 of 31 December 2007 ( Gazzetta Ufficiale  No 302, 31.12.2007, p. 4). 
3 threshold for the overall remuneration of any Ba nca d’Italia servant, as well as in public 
administration and the independent authorities, of double the First President of the Supreme Court’s remuneration. The ECB understands that th is threshold will apply to all Banca d’Italia 
servants.  
3.2.2 The ECB notes that, under the current regime, th e Banca d’Italia enjoys statutory autonomy in 
determining its servants’ salaries, including the Directorate. An act of the Board of Directors determines the remuneration of the Banca d’Italia ’s servants, subject to internal and external 
controls. In this regard it may also be noted  that the ECB defines autonomously its staff’s 
conditions of employment and that this aut onomy forms part of the ECB’s independence as 
guaranteed by Article 108 of the Treaty and Article 36 of the Statute of the European System of Central Banks and of the European Central Ba nk (hereinafter the ‘ESCB Statute’). The new 
provisions of Article 3(46) of the 2008 Budget Law represent a departure from the current regime 
in that the determination of remuneration of Ban ca d’Italia’s servants will be subject to the limit 
referred to in that Article. In order to ensure th at Article 3(46) is consistent with the Community 
requirements for personal independence of the members of NCBs’ decision-making bodies, the 
new legislation introducing a remuneration threshol d for the Banca d’Italia should be implemented 
so as to ensure that it does not affect the term s under which the current members of its decision-
making bodies have been appointed. Therefore, the new legislation should only apply to future appointments. 
3.3 Central bank independen ce – Financial independence 
3.3.1 The concept of financial independence is assessed  from the perspective of whether any third party 
is able to exercise either direct or indirect in fluence not only on the performance of an NCB’s tasks, 
but also on its ability - both operational in terms of  manpower and financial in  terms of appropriate 
financial resources - to fulfil its mandate
6. The ECB has noted in the past that Member States may 
not put their NCBs in a position where they risk having insufficient financial resources to carry out 
such ESCB or Eurosystem-related tasks7. In the present case, the ECB is concerned that the Banca 
d’Italia’s ability to carry out its tasks may be affected by future legislation foreseen in the 
2008 Budget Law. 
3.3.2 Article 3(45) of the 2008 Budget Law subjects th e Banca d’Italia to a law to be adopted in the 
future, reforming the independent authorities, which will regulate their financing modalities, 
expenditure control and related issues . It has to be ascertained that this envisaged future legislation 
does not affect the Banca d’Italia’s financial inde pendence In particular, it will need to take into 
account the Banca d’Italia’s stat us as a member of th e Eurosystem and its specific auditing and 
controlling structure (Article 38 of the Banca d’It alia’s Statute), which the ECB welcomed in its 
opinion on the new Statute8. Considering that the future legisla tion foreseen in Article 3(45) of the 
2008 Budget Law is intended to regulate aspects such as, inter alia , expenditure control, the ECB 
                                                 
6  See ECB Convergence Report 2007, p. 20.  
7  See ECB Convergence Report 2007, p. 19.  
8  See ECB Opinion CON/2006/44 of 25 August 2006, paragraph 3.2. 
4 understands that such future legislation will exclude any ex ante  third party  intervention in the 
Banca d´Italia’s expenditure needed for the Banca d’Italia’s statutory tasks, including both its 
ESCB and non-ESCB related tasks, in compliance w ith the principle of financial independence, 
and that the scope of any such control will be clearly defined by the legal framework and be 
without prejudice to the activities of the Banca d’It alia’s independent extern al auditors, as laid 
down in Article 27.1 of the ESCB Statute9. Along the same lines, as explained in paragraph 3.2.2, it 
is noted that also in this respect the new law would depart from the current regime which leaves 
regulation of these matters to the statutory autonom y of the Banca d’Italia and would consequently 
weaken its independence . Finally, Article 3(45) of the 2008 Budget Law departs from Article 17(9) 
of the draft law on the independent authorities, relating specifically to the organisation of the authorities, according to which the Banca d’Italia is fully exempted by the scope of Article 17 
itself. Such an exemption should specifically apply also to Article 3(45) of the 2008 Budget Law.  
3.4 Monetary financing prohibition 3.4.1 The Law regulating the account held by the Italia n Treasury with the Banca d’Italia to manage the 
Treasury services was adopted prior to European Monetary Union
10. Article 5(5) of the 2003 
Consolidated Law, which mirrors the same provisi on already in force since 1993, provides that the 
Banca d’Italia attributes, at the beginning of each six months, interest equal to the average of Treasury bills issued in the previous six months to the ‘Treasury availability to provide Treasury 
services’ account
11. The 2003 Consolidated Law does not contain provisions on the maturity of 
deposits and, consequently, does not explicitly corre late the remuneration rate of the deposits with 
their maturity.  
3.4.2 The 2003 Consolidated Law currently in force is constructed so that it does not exclude the 
possibility of Treasury deposit remune ration rates being higher than the market rates in particular 
for the remuneration of overnight deposits. Such  a remuneration rate would contravene the 
objectives of the monetary financing prohibition under the Treaty12. From an economic perspective, 
the prohibition of monetary financing by central banks of government activ ities is independent of 
its form, i.e. loans, or other direct financial means (e.g. the provision of direct, non-reimbursable funding to the public sector). Interest pa yments above market rates constitute a de facto  advanced 
distribution of profits to the government. This, in turn, implies a de facto  intra-year credit, contrary 
to the objective of the monetary financing prohib ition. Therefore, the remuneration for government 
deposits should not go beyond the re muneration applied to a simila r deposit made by a market 
counterparty. If the remuneration mechanism for go vernment deposits allows the Government to 
systematically steer the remuneration by an NCB at a rate above the rate at which a similar deposit 
                                                 
9  See ECB Convergence Report May 2007, p. 20. 
10  Law No 483 of 26 November 1993 ( Gazzetta ufficiale  No 282, 1.12.1993). 
11 The 2007 calendar for the issue of Treasury bills provides for th e issue of six-month and 12 month Treasury bills, while it 
previously also issued three-month Treasury bills.  
12 According to paragraph 20 of Case 283/81, Srl CILFIT  and Lanficio di Gavardo SpA v Italian Ministry of Health  [1982] 
ECR 3415 ‘every provision of Community law must be placed in its context and interpreted in the light of the provisions 
of Community law as a whole, regard being had to the objectives thereof’. 
5 would be remunerated by a market counterpart y, in addition to constituting a breach of the 
monetary financing prohibition it ma y have undesired signalling effects. 
3.4.3 The ECB notes that the draft 2008 budget la w initially submitted to the Parliament aimed at 
remedying the above described problematic provisi ons by introducing the following provision in 
Article 5(5), linking clearly the deposit remunera tion rate to the market: ‘The Minister for 
Economic Affairs and Finance and the Banca d’Italia  shall establish by means of agreements, to be 
agreed within 90 days of entry into force of  this Law, the conditions for maintenance and 
remuneration of the account, which shall be linke d to market rates’. However, the amendments 
introduced by Parliament to Article 5(5) of the 2003 Consolidated Act no longer contain this 
provision, thus maintaining the incompatibility of  Italian law with the prohibition of monetary 
financing. 
3.5 Monetary policy implementation 3.5.1 Government deposits held with the Eurosystem reduce the amount of liquidity available to the euro 
area’s banking sector. Therefore, the deposits have  to be forecast when calibrating the ECB’s open 
market operations. The Banca d’Italia and the other NCBs of the Eurosystem provide these 
forecasts to the ECB on a daily basis. Since 1999, their precision has to a large extent depended on the procedures for the management of governme nt deposits, which differ widely between the 
different countries of the euro area. On an aggreg ate level, errors in the forecast of government 
deposits have continuously caused a large part of th e errors in the forecast of liquidity needs of the 
euro area banking sector as a whole. Given the pa rticular nature of the procedures for managing 
government deposits in Italy, the ECB welcomes an y effort to make the forecasts of government 
deposits at the Banca d’Italia more reliable. In  that respect, the 2008 Budget Law provides that 
deposits in excess of a threshold agreed between th e MEF and the Banca d’Italia in the context of 
the exchange of information on cash flows will no l onger be remunerated. This can be expected to 
provide an incentive for the MEF to transfer funds in excess of this threshold to the banking sector.  
3.5.2 This measure could indeed reduce forecasting errors in the liquidity management transactions 
(OPTES) procedures. These procedures were introdu ced in April 2007 to increase flexibility in the 
management of Treasury funds and thereby satis fy the MEF’s short-term financial needs and 
improve the predictability of the available account balance
13. As mentioned in the statement of 
reasons, the performance of OPTES with respect to  avoiding forecasting errors could greatly 
improve by introducing transactions transferring surplus balances from the MEF’s account with the 
Banca d’Italia to the banking system. For these reasons, the change planned for the remuneration regime should be implemented as soon as possible.  
3.5.3 The change planned for the remuneration regime is  insufficient alone to achieve high precision in 
government deposit forecasting. However, Article  5(5), as amended by the 2008 Budget Law, 
provides that ‘To stabilise the balance w ith the forecast, the liquidity management 
                                                 
13  See press release of the MEF and the Banca d’Italia of 13 April 2007, ‘Starting of the liqui dity management transactions 
(OPTES)’. 
6 modalities…shall be established by means of a late r decree of the Minister for Economic Affairs 
and Finance.’ Without knowing these modalities in  detail, it is not possible for the ECB to 
conclusively assess future government deposit manageme nt procedures in Italy. They should in any 
event leave no scope for liquidity management ope rations to be specified in accordance with 
interest rates. 
3.5.4  The ECB expects that the ex act specifications of the future procedures for the management of 
government deposits in Italy will be compatible with the efficient implementation of monetary 
policy. This may require further modifications to the law.   
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 21 February 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET