The Italian mystery deepens. Now it seems we're using Enron style special purpose vehicles to move debt off balance sheet to meet EU stability pact requirements:
Italy and the European Union Commission clashed Thursday over controversial accounting practices, another sign of increasing tensions over Europe's strict budget rules.
Like other European countries, Italy has promised to balance its budget by 2003 and has been leveraging state-owned assets to help it reach its goal. Wednesday, the Commission's statistics arm, Eurostat, outlawed this practice, ruling that borrowings secured on future government revenues can no longer be pushed off the national balance sheet.Under the Italian financing program, Rome parked state assets such as real estate and lottery revenues in special-purpose vehicles, which then issued debt. Since the government didn't issue the bonds itself, the debt didn't end up in the national accounts and inflate the deficit.
Source: Yahoo News
Now if Italy had a nicely balanced population structure, then probably none of this would matter. But this isn't the case, so one day this debt is going to make itself felt on balance-sheet, and then this particular bubble is going to burst. Don't say you haven't been warned.
Incidentally, following the story I blogged earlier this week, Italy's Interior Minister has now resigned following his comments that the assasinated government economic adviser was a pain in the neck. I don't really know what the definition of a 'banana republic' really is, but if there was such a thing would the current Italian administration fit the description?