On a number of occasions, we have referred to allegations that the Italian government used derivatives to allow it to meet the requirements for joining the Euro zone in the 1999. Given recent market reports of large unrealized losses on derivative contracts held by the Italian government, it was announced that there would be a government inquiry launched.
We would expect that nothing will come out of any investigation that is done during any administration of the established parties. The established parties would not risk a Greek-like announcement about the true size of its public debts. However, should Grillo and his Movement form a government, than we would be able to expect a truthful accounting of Italy’s public debt.
Refer to: http://www.bdlive.co.za/world/europe/2013/06/27/italy-probes-use-of-derivatives-in-public-debt-discord, and
http://blogs.wsj.com/moneybeat/2013/06/26/about-that-e8-billion-italian-derivatives-hit/.
We will continue to monitor the Italian government fiscal situation, as it has the potential to be a trigger for much larger issues.