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)
Date: 2008-02-21
Institutions: European Central Bank
Subjects: Italy, central bank, national budget, national law, public expenditure, remuneration of work

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 budget (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 
provisions1, 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 the ECB affect the role of the Banca d’Italia as a 

national  central  bank  (NCB)  of  the  Eurosystem  and  cover  two  different  fields.  On  the  one  hand, 

Article 2(39) of the 2008 Budget Law implements a structural reform to the government account held at 

the  Banca  d’Italia  by  amending  the  Law  on  consolidation  of  legislative  provisions  and  regulations  on 
public debt (hereinafter the ‘2003 Consolidated Law’), which regulates the single Treasury account3. On 

the other hand, Article 3(44) to (49) of the 2008 Budget 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  will  be  delegated  to  a  future  law  reforming  the 

1  
2  
3  

OJ L 189, 3.7.1998, p. 42.  
Gazzetta Ufficiale No 300, 28.12.2007, Supplemento ordinario No 285. 
Presidential Decree No 398 of 30 December 2003 (Gazzetta Ufficiale No 57, 9.3.2007, Supplemento ordinario). 

 
 
 
 
                                                 
independent authorities in Italy, including the Banca d’Italia. 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  after  adoption  of  the  law,  Decree-Law  No  248  on  the 

extension of deadlines set by legislative provisions and urgent provisions on financial matters (hereinafter 
the  ‘Decree-Law’)  was  adopted5.  According  to  Article  42(1)  of  the  Decree-Law,  Article  2(39)  of  the 

2008 Budget  Law  only  enters  into  force  following  the  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  stage  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 consulted at an appropriate point in time to allow the 

consulting  authority  to  take  its  opinion into  consideration  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 days 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, the 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 administration 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 establishes 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  administration  and  exempts  the  Banca  d’Italia  from  the 

scope of this general rule. However, Article 3(46) of the 2008 Budget Law provides for a specific 

4  

5  

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 and the functioning of the competent independent authorities. 
Decree-Law No 248 of 31 December 2007 (Gazzetta Ufficiale No 302, 31.12.2007, p. 4). 

2 

 
 
                                                 
threshold  for  the  overall  remuneration  of  any  Banca  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  this  threshold  will  apply  to  all  Banca  d’Italia 

servants.  

3.2.2  The  ECB  notes  that,  under  the  current  regime,  the  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  autonomy  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  Bank  (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  Banca  d’Italia’s  servants  will  be  subject  to  the limit 

referred to in that Article. In order to ensure that 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 threshold for the Banca d’Italia should be implemented 

so as to ensure that it does not affect the terms 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 independence – 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 influence 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 mandate6. 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  the  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  independence  In  particular,  it  will  need  to  take  into 

account  the  Banca  d’Italia’s  status  as  a  member  of  the  Eurosystem  and  its  specific  auditing  and 

controlling  structure  (Article  38  of  the  Banca  d’Italia’s  Statute),  which  the  ECB  welcomed  in  its 
opinion on the new Statute8. Considering that the future legislation foreseen in Article 3(45) of the 

2008 Budget Law is intended to regulate aspects such as, inter alia, expenditure control, the ECB 

6  
7  
8  

See ECB Convergence Report 2007, p. 20.  
See ECB Convergence Report 2007, p. 19.  
See ECB Opinion CON/2006/44 of 25 August 2006, paragraph 3.2. 

3 

                                                 
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  with  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’Italia’s  independent  external  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 autonomy 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 Italian Treasury with the Banca d’Italia to manage the 
Treasury  services  was  adopted  prior  to  European  Monetary  Union10.  Article  5(5)  of  the  2003 

Consolidated Law, which mirrors the same provision 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’  account11.  The  2003  Consolidated  Law  does  not  contain  provisions  on  the  maturity  of 

deposits and, consequently, does not explicitly correlate 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 remuneration 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 activities 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 payments 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 prohibition. Therefore, the remuneration for government 

deposits  should  not  go  beyond  the  remuneration  applied  to  a  similar  deposit  made  by  a  market 

counterparty.  If  the  remuneration  mechanism  for  government  deposits  allows  the  Government  to 

systematically steer the remuneration by an NCB at a rate above the rate at which a similar deposit 

9  
10  
11 

12 

See ECB Convergence Report May 2007, p. 20. 
Law No 483 of 26 November 1993 (Gazzetta ufficiale No 282, 1.12.1993). 
The 2007 calendar for the issue of Treasury bills provides for the issue of six-month and 12 month Treasury bills, while it 
previously also issued three-month Treasury bills.  
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’. 

4 

                                                 
would  be  remunerated  by  a  market  counterparty,  in  addition  to  constituting  a  breach  of  the 

monetary financing prohibition it may have undesired signalling effects. 

3.4.3  The  ECB  notes  that  the  draft  2008  budget  law  initially  submitted  to  the  Parliament  aimed  at 

remedying  the  above  described  problematic  provisions  by  introducing  the  following  provision  in 

Article  5(5),  linking  clearly  the  deposit  remuneration  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  linked  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  government  deposits,  which  differ  widely  between  the 

different  countries  of  the  euro  area.  On  an  aggregate  level,  errors  in  the  forecast  of  government 

deposits have continuously caused a large part of the errors in the forecast of liquidity needs of the 

euro  area  banking  sector  as  a  whole.  Given  the  particular  nature  of  the  procedures  for  managing 

government deposits in Italy, the ECB welcomes any 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 the MEF and the Banca d’Italia in the context of 

the exchange of information on cash flows will no longer 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 introduced in April 2007 to increase flexibility in the 

management  of  Treasury  funds  and  thereby  satisfy  the  MEF’s  short-term  financial  needs  and 
improve  the  predictability  of  the  available  account  balance13.  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  with 

the  forecast, 

the 

liquidity  management 

13  

See press release of the MEF and the Banca d’Italia of 13 April 2007, ‘Starting of the liquidity management transactions 
(OPTES)’. 

5 

                                                 
modalities…shall be established by means of a later 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 management procedures in Italy. They should in any 

event  leave  no  scope  for  liquidity  management  operations  to  be  specified  in  accordance  with 

interest rates. 

3.5.4  The  ECB  expects  that  the  exact  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 

6