Opinion of the European Central Bank of 14 February 2011 on Italy’s participation in International Monetary Fund programmes in response to the financial crisis (CON/2011/10)
Date: 2011-02-14
Institutions: European Central Bank
Subjects: International Monetary Fund, Italy, central bank, financial stability, loan, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 14 February 2011 

on Italy’s participation in International Monetary Fund programmes in response to the financial crisis 

(CON/2011/10) 

Introduction and legal basis 

On  20  January  2011,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Italian  Ministry  of 

Economic Affairs and Finance for an opinion on a decree-law on the extension of deadlines and on urgent 
measures  in  the  field of  taxation  and in  support  of  enterprises  and  families1,  concerning  also  Italy’s 

participation  in  International  Monetary  Fund  (IMF)  programmes  in  response  to  the  financial  crisis 

(hereinafter the ‘Decree-Law’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Articles  127(4)  and  282(5)  of  the  Treaty  on  the 

Functioning  of  the  European  Union  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 provisions2, as the Decree-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. 

1.  

Purpose of the Decree-Law 

1.1   Article 2(13) to (16) of the Decree-Law3 regulates the relations between Italy and the IMF with regard 

to  the  implementation  of  the  commitments  made  by  the  Italian  State  to  the  IMF  in  response  to  the 
financial crisis4. 

1.2  The  Decree-Law  refers  to  the  expansion  of  the  IMF’s  New  Arrangements  to  Borrow  (NAB).  The 
increase  in  the  NAB,  as  approved  by  the  IMF’s  Executive  Board  on  12  April  20105,  includes  credit 

1  

2  
3  

4  

Decree Law No 225 of 29 December 2010, Gazzetta Ufficiale della Repubblica Italiana, Serie generale No 303, 29.12.2010, 
p. 1. 
OJ L 189, 3.7.1998, p. 42.  
The Decree-Law was adopted by the Italian Government on 29 December 2010 and entered into force on the same day. Under 
the  Italian  Constitution,  the  Decree-Law  needs  to  be  converted  into  a  law  by  the  Italian  Parliament  within  60  days  from 
adoption by the Government. 
As also provided in Article 2(13) of the Decree-Law, the initiatives were decided at the G20 Summit of the Heads of State and 
Government  held  in  London  on  2  April  2009,  later  reaffirmed  at  the  G20  Summit  held  in  Seoul  in  November  2010,  and 
supported by the European Council. See also the Presidency Conclusions of the European Council held in Brussels on 18 and 
19 June 2009. 

 
 
 
 
                                                 
lines from new NAB participant countries and additional credit lines from existing NAB participants, 

such  as  Italy.  Under  the  expanded  and  more  flexible  NAB,  credit  of  up  to  SDR  367,5  billion 

(equivalent  to  about  EUR  429,6  billion)  will  be  available.  Member  States  have  agreed  to  contribute 
EUR  125  billion  to  the  expanded  NAB6.  According  to  the  Decree-Law,  Italy’s  contribution  will 
amount to EUR 13,58 billion7, to be funded from the Banca d’Italia’s resources8.  

1.3  

In view of the uncertain economic situation9, a number of IMF member countries have agreed to make 

bilateral agreements with the IMF in the  interim. The Decree-Law implements such an agreement to 

provide an interim bilateral loan, authorising the Banca d’Italia to grant the IMF a loan of up to EUR 
8,11 billion10 on Italy’s behalf. The IMF’s Executive Board approved a draft borrowing agreement with 

the  Banca  d’Italia  on  27 October  2009  that  became  effective  on  entry  into  force  of  the  Decree-Law. 

The bilateral agreement with the IMF addressed in the Decree-Law may be terminated once the new 
NAB agreement has entered into force11.   

1.4  The Decree-Law also refers to Italy’s participation in the Extended Credit Facility (ECF) of the Poverty 
Reduction and Growth Trust (PRGT)12. The Decree-Law authorises the Banca d’Italia to provide loans 

at  market  rates  of  up  to  SDR  800  million,  whereas  the  Italian  Ministry  of  Economic  Affairs  and 
Finance will provide a SDR 22,1 million subsidy13. 

1.5  The  State  budget  will  guarantee  the  reimbursement  of  the  capital  and  interest  and  will  cover  any 

exchange rate risk on the loans provided by the Banca d’Italia under the Decree-Law. 

2. 

General observations  

2.1 

It  is necessary to assess whether  the decree law complies with the prohibition of monetary financing 

under  Article  123(1)  of  the  Treaty,  which  prohibits  overdraft  facilities  or  any  other  type  of  credit 

5  

6  
7  

8  

The IMF’s Executive Board adopted a ‘Proposed decision to modify the New Arrangements to Borrow’ on 12 April 2010. It 
is available on the IMF’s website at www.imf.org. 
Italy’s agreed share of this contribution was SDR 13 578 million. 
Until  now  Italy  has  participated  in  the  NAB  with  a  credit  line  provided  by  the  Banca  d’Italia  currently  amounting  to 
SDR 1 753 billion (equivalent to about EUR 2 billion).. 
According to the explanatory memorandum, the Italian contribution will be charged to the Banca d’Italia and will not affect 
the Italian State budget. 
The process of consents and adherences to the proposed expansion of the NAB has not yet been completed. 

9  
10   Where  additional  financial  resources  are  needed,  the  Banca  d’Italia  may  contribute  up  to  a  cumulative  total  of  EUR  13,53 

11  

12  

13  

billion. See Article 2(13)(b) of the Decree-Law. 
The  bilateral  loan  will  be  offset  against  Italy’s  extended  provision  of  credit  arrangements  under  the  NAB  of  EUR  13,53 
billion. 
On  23  July  2009,  the  IMF’s  Executive  Board  approved  wide  ranging  modifications  to  upgrade  its  concessional  financial 
facilities for low-income countries. The decision adopted by the IMF’s Executive Board establishes the PRGT, replacing and 
expanding  the  former  Poverty  Reduction  and  Growth  Facility-Exogenous  Shocks  Facility.  The  PRGT  includes  new 
financially improved credit lines, such as the ECF, that are considered to be more adapted to low-income countries’ needs. 
According to the explanatory memorandum, this amount represents remaining contributions that have already been provided 
but which will be considered as new resources.  

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facility  with  national  central  banks  (NCBs)  in  favour  of  central  governments.  This  prohibition  is 

subject to certain exceptions contained in Article 123(2) of the Treaty and in 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 Treaty14. In particular, Article 7 of Regulation (EC) No 3603/93 

provides that the financing by NCBs of obligations falling upon the public sector vis-à-vis the IMF is 
not regarded as a credit facility within the meaning of Article 123 of the Treaty15. 

It  is  also  necessary  to  ensure  that  the  possible  euro  liquidity  injections  resulting  from  the  Banca 

d’Italia’s  funding  of  Italy’s  participation  in  the  NAB,  from  the  disbursements  by  the  Banca  d’Italia 

under the bilateral loan agreement between the Banca d’Italia and the IMF and from the loans granted 

by  the  Banca  d’Italia  under  the  ECF  of  the  PRGT,  do  not  interfere  with  the  implementation  of  the 

single  monetary  policy.  Under  paragraph  23  of  the  IMF’s  Proposed  Decision  to  Modify  the  New 

Arrangements to Borrow, there is a presumption that the IMF will notify the respective central bank at 

least five business days prior to drawing. Likewise, under paragraph 2(a) of the Borrowing Agreement 

between  the  Banca  d’Italia  and  the  IMF,  the  IMF  will  give  the  Banca  d’Italia  at  least  five  business 

days’  notice  of  its  intention  to  draw.  Also  with  regard  to  the  loans  under  the  ECF  of  the  PRGT,  the 

Banca d’Italia should  be  given sufficient notice of a loan.  This will allow  for  possible  euro  liquidity 

injections under these facilities to be taken into account when implementing single monetary policy 

Increase of the credit limits under the expanded IMF’s NAB 

2.2  Opinion  CON/1997/16  considered  a  draft  law  authorising  the  Oesterreichische  Nationalbank 
(hereinafter the ‘OeNB’) to grant, in Austria’s name, a loan to the IMF, and Opinion CON/2010/7416 

considered  a  draft  law  authorising  the  OeNB  to  increase  on  Austria’s  behalf  the  credit  limits  for  the 

NAB with the IMF. In both Opinions, the ECB concluded that the operations covered were not a credit 

facility within the meaning of Article 123(1), but fell within the exception in Article 7 of Regulation 

(EC) No 3603/93. Similarly, the Banca d’Italia’s authorisation, under the Decree-Law, to increase the 

credit limits for the NAB should be considered as falling within the scope of Article 7 of Regulation 

(EC) No. 3603/93, and should therefore not be regarded as a form of monetary financing prohibited by 

the Treaty.  

Bilateral loan with the IMF 

2.3  The  Banca  d’Italia’s  authorisation  under  the  Decree-Law  to  grant  a  bilateral  loan  to  the  IMF  should 

also be considered as falling within the scope of Article 7 of Regulation (EC) No 3603/93, and should 

therefore  not  be  regarded  as  a  form  of  monetary  financing  prohibited  by  the  Treaty.  Opinion 

14  
15  

16  

OJ L 332, 31.12.1993, p. 1. 
The 14th recital of Regulation (EC) No 3603/93 reads as follows: ‘Whereas the financing by the central banks of obligations 
falling upon the public sector vis-à-vis the International Monetary Fund or resulting from the implementation of the medium-
term financial assistance facility set up within the Community results in foreign claims which have all the characteristics of 
reserve assets; whereas it is, therefore, appropriate to authorise them’. 
All Opinions are available on the ECB’s website at www.ecb.europa.eu. 

3 

 
 
 
 
                                                 
CON/2009/100 considered a draft law authorising Banka Slovenije to provide payments to the IMF on 

the  basis  of  a  bilateral  agreement  between  Slovenia  and  the  IMF,  while  Opinion  CON/2010/40 

considered a draft law authorising the OeNB to provide payments to the IMF on the basis of a bilateral 

agreement between the OeNB and the IMF. In both cases, the ECB came to the same conclusion. 

Contribution to the IMF’s ECF of the PRGT 

2.4  Opinion CON/2010/22 considered more closely an NCB’s involvement in financing the IMF’s facility 
for  low-income  countries.  Similarly,  Opinion  CON/2008/4117  considered  a  draft  law  on  the  OeNB’s 

involvement  in  financing  the  IMF’s  PRGF  and  PRGF-HIPC  Trusts  for  Liberia’s  debt  relief,  and 

Opinion CON/2005/29 considered a draft law on the OeNB’s authorisation to pay, in Austria’s name, a 

contribution to the trust fund administered by the IMF for low income developing countries affected by 

natural disasters. In all the abovementioned Opinions, the ECB took the view that an NCB’s financing 

of an IMF-administered initiative fell within the exemption in Article 7 of Council Regulation (EC) No 

3603/93. Also in view of the above, the provision by the Banca d’Italia of loans under the ECF of the 

PRGT  should  be  considered  as  falling  within  the  exemption  in  Article  7  of  Regulation  (EC)  No 

3603/93  and  therefore  should  not  be  regarded  as  a  form  of  monetary  financing  prohibited  by  the 

Treaty. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 14 February 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

17  

This  Opinion  considered  that  an  NCB’s  involvement  in  financing  such  an  IMF  initiative  reduces  what  is  in  principle 
government expenditure on development aid, and that the NCB effects this reduction by immediately transferring funds in lieu 
of the Government. 

4