Central bank owns 18% of Italian government debt

The Italian central bank has bought up so many government bonds in the last three years that it already has 18% of the total Italian government debt on its balance sheet. Deutsche Bank collected data since 1990 and concludes that the central bank, the Italian financial institutions and foreign investors hold an increasingly larger share of Italian sovereign debt, while private investors have reduced their holdings significantly.

Back in 1990, about 70% of the Italian government debt was financed by private investors, today it is less than 10%. The ECB (and before that the Italian central bank) held on average only 5% of all government bonds since 1990, until the decision was taken in early 2015 to buy those assets on a large scale through the public sector purchase programme (PSPP). Since then, the share of the central bank has increased, with the result that they will probably exceed 20% this year.

It is also striking that domestic financial institutions and foreign investors are increasing their share of Italian sovereign debt. While their share in 1990 was still 18% and 4% respectively, today this amounted to 41% and 35%. As a result, these two groups are the main financiers of the Italian sovereign debt, which – with over 130% of GDP – is almost the highest of all countries in the euro zone.

Update: According to ECB spokesman William Lelieveldt it is not the ECB owning these Italian government bonds, but the Eurosystem as a whole, which is comprised of national central banks from all Eurozone member states. Most Italian bonds are therefore held by the Banca d’Italia.

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