WRITTEN QUESTION P-0683/98 by Umberto Bossi (NI) to the Commission (2 March 1998)

Subject: The Banca d'Italia's gold and the Italian public sector borrowing requirement

The circumstances surrounding the sale of gold belonging to the Banca d'Italia to the Ufficio Italiano Cambi (UIC, the Italian Foreign Exchange Office) is only the latest in a long series of scandals which have shown Italy in the undignified role of desperately attempting to meet the Maastricht criteria.

A document recently approved in Brussels by the Commission, to the effect that the Council will look into this case and that Eurostat is in the process of investigating the matter to ascertain the nature of the transaction in question, notes that in 1974, to protect the lira against attacks by speculators, the Banca d'Italia obtained a US $ 2 billion loan from the Bundesbank. The UIC purchased 543 tonnes of gold from the Banca d'Italia to underwrite the loan. The loan was paid off in September 1978, but the gold remained on the UIC's balance sheet. It was revalued over the years, but the corresponding capital gains were never taxed because, under Italian tax law, capital gains are not subject to tax until they are realized. In July 1997 the UIC -which, by the way, was in the process of being wound up- sold the gold back to the Banca d'Italia. That operation generated a capital gain of c. Lit 7600 billion, and hence the requirement to pay Lit 4000 billion in tax, part of which (Lit 3 400 billion) was paid in November 1997. Consequently the sum of Lit 3400 billion was credited to the public exchequer and duly entered against the public sector deficit, which proved to have been kept down to 2.7% of GDP by the end of 1997, in other words well below the crucial 3% ceiling set by the Maastricht criteria.

Does the Commission intend to finally ascertain the nature of this transaction?

Does the Commission intend to establish whether it is permissible to encourage tax revenues of this kind to be offset against the public sector deficit?

If not, does the Commission not consider that this incident shows yet again that Italy has not changed its ways and is prepared to stoop to dubious accounting practices in order to enter Europe?

Answer given by Mr de Silguy on behalf of the Commission (17 March 1998)

In the framework of the monitoring procedures established by the EC Treaty, such as the multilateral surveillance (Article 103) and the excessive deficit procedure (Article 104c) the Commission has always thoroughly assessed the scope and nature of macroeconomic and fiscal adjustment of individual Member States, making a clear distinction between structural and temporary measures. In doing so, the Commission has watched over the transparency and the accuracy of the accounting systems of all Member States.

Concerning the specific operation to which the present question refers, the Commission has already analysed its nature and determined its appropriate accounting treatment in terms of the system of integrated accounts 'ESA 79'. In particular, in its decision No 5/98 of 27 January 1998 'Eurostat has decided to treat this payment as a financial transaction which has no effect on the measurement of the government deficit as defined for the purposes of the excessive deficit procedure'. In other words, this operation will not reduce the deficit in the definition which is relevant for access to European monetary union (EMU), that is, the general government net borrowing.

The Commission will present an assessment of the sustainability of the Italian budgetary position, as well as that of other Member States, in its report on convergence, in accordance with Article 109j(1) EC Treaty to be released by 25 March 1998.