Bank of Italy released the government debt statistics for June. As always a few entries are not quite up to date but they still allow for some important conclusions.

Table 5 includes monthly statistics by holding sector. ‘Resident MFIs’ increased their holdings during 2012 from €515,58bn in December 2011 to €607,69bn in May (+€92.11bn), ‘Other Resident Financial Institutions’ from €291,48bn to €315.21bn (+€23.73bn) and ‘Other Residents’ from €261.87bn to €333.91bn in April (+€72.04bn). It is clear that resident MFIs and other residents were the main drivers of the increase in resident holdings of Italian government debt. On the other hand, ‘Non Residents’ decreased their holdings from €739.51bn to €619.34bn in April (-€120.17bn or 16% of their holdings). In December 2011 residents held 61% of total government debt while in April the percentage increased to 68%, a change of more than 6% in 4 months time.

Overall, government debt increased by €75.06bn during the first half of 2012, compared with €58.76bn in the first half of 2011 and €55.74bn for the whole of 2011, an increase of more than 4.75% of GDP from 120.1% to 124.9% GDP. Given the fact that Italy is already in a deep recession (with quarterly GDP dropping 0.7-0.8% in 2012Q1 and Q2) government debt is on a path to quickly reach 130% of GDP (although around 6% will be held by Bank of Italy).

Based on OECD data, if this pattern of a loss of 0.7% of GDP quarterly continues, Italy will be back to 2001 GDP levels by the end of 2012 and pre-Euro in the mid-2013.

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