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ECB Tapering May Trigger "Disorderly Restructuring" of Italian Debt, Return to National Currency

Since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy's deficits from 2014 to 2019. But now there's a snag... The ECB has already reduced the rate of purchases to €60 billion a month. And it plans to further withdraw from the super-expansionary monetary policy....Astellon Capital's report on Italy's dependence on ECB bond purchases poses the question: If the ECB tapers its purchase of Italian bonds further, who would pick up the slack?... According to Astellon , the only long-term solution to this problem is to carry out an orderly restructuring of Italian debt. In fact, by this stage in proceedings, the stark choice is between an orderly or disorderly restructuring of Italy's debt... [the latter] would significantly increase the likelihood of an Italian exit from the Eurozone.

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