Monday, April 16, 2012

16/4/2012: Italian debt is going up, not down

John Langdon Down - a descendant of an Irishman and a British psychiatrist was, reportedly, the first person to use the French term 'idiot savant' to describe a specific condition in which a brain injury can lead to a person with 'developmental delays' of the brain is being able to demonstrate "profound and prodigious capacities and/or abilities in excess of those considered normal". I am no psychiatrist, but the cheerful reports with today's news that Italian Government debt has declined month on month in February were met suggests to me a manifestation of the similar nature.

Here are the facts. Italian public debt is down €6.8bn in February to €1,928 billion - a drop of 0.35% month-on-month. With a borrowing requirement down €1.4bn yoy in February, but flat at €12.7bn for two months January-February, compared to 12mos ago. It is the latter part - the static nature of Government borrowing requirements, not the former part - the reduction in debt, that matters most. The reason is simple - see charts below:

You see, in January-February 2011, tax receipts were €56,370mln, against €53,940mln in Government expenditure, yielding 2mos cumulated balance surplus of €5,072mln. In 2012, same period tax receipts were €55,931mln or €439mln below 2011 figures, with Government spending at €54,290mln or €350mln ahead of same period last year. January-February 2012 Government balance was in surplus €5,302mln. So the debt 'repayments' are not a sign of any improvement in the fiscal dynamics.

Now, there is a bit more to consider here, folks. The stated reduction in the Government debt is month-on-month and the statement above syas nothing about year-on-year comparison. Ok, so let's take Table 10 from April 16th Banca d'Italia data release. Column 1... errr... General Government Debt:
February 2011 at €1,875,010 mln, against February 2012 at €1,928,211 mln. Contrary to the cheerful view of 'debt falling €6.8bn', Italian debt went up year on year €53,201mln.
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