In a bid to shore up its economy, Italy is actively seeking the savings of its citizens. However, this strategy appears to be sidelining smaller firms, leaving them in a precarious position, as reported by Reuters on Thursday.
Italy is pushing its populace, especially the wealthy, to help refinance its enormous public debt as the European Central Bank cuts back its purchases of government bonds for the euro zone.
Increasing domestic ownership of Rome’s debt could enhance its shock resilience, as smaller savers are less prone to crisis panic. This domestic ownership is vital for the euro zone’s survival.
The reduction in wealth could significantly impact the Italian economy, where most small businesses grapple with cash shortages for growth.
As Italy’s small public equity market contracts further and alternative investments remain accessible only to the rich, listing advisers suggest that the Treasury’s retail funding policy is steering capital away from enterprises.
Rising interest rates have reignited Italian investors’ interest in their €2.4 trillion ($2.6 trillion) government bond market, which enjoys a tax rate significantly lower than other financial investments or bank deposits.
By late February, in time for a new retail bond sale, Italy plans to implement measures to enable savers to exclude up to €50,000 ($54,000) in government bonds from a wealth index used by the state to determine welfare benefit eligibility, according to government sources.
In 2023, the Treasury will issue bonds worth 44 billion euros to retail investors. These investors now hold 13.5 per cent of its debt, a figure that’s over twice the mid-2022 level.
Luca Cazzulani, UniCredit’s Head of Strategy Research, stated that bonds for retail investors saw tremendous success in 2023.
He further noted that savers primarily funded their purchases using bank deposit cash and by selling mutual funds and insurance products.
Italian banks saw a loss of 56 billion euros in household deposits over the year until November, and trading volumes for mid-sized companies on the stock market fell by half.
This led finance professionals to call for government intervention. The Italian Treasury has pledged to introduce new strategies to direct private savings towards supporting business investments but has provided few specifics.
In 2023, a plan aimed at directing more of the 5 trillion euros in financial wealth of Italian households into small businesses experienced outflows of 2.5–2.6 billion euros, according to calculations by broker Equita.
This happened as a five-year term ended, permitting divestment with continued tax benefits.
In February, Rome plans to endorse measures to enhance the power of long-term shareholders and boost listings. However, this strategy has upset large international funds, which constitute 90 per cent of investors in Italian stocks.
