Therefore, a transparency operation is necessary: why are over 3 billion euros annually in financial charges – which will weigh on our accounts for the next 30 years, albeit decreasingly – determined so opaquely, and why does the MEF not publish, as it does for BTP auctions, the Commission’s confirmation notices?
A question that, in the days when the BTP Valore is set to easily raise 15 billion from small savers, struggles to find an answer to justify the interest expense related to the 99 billion (which will rise to 123 by the end of the year) in loans for the PNRR.
In an initial estimate, we stopped at 60 billion, but by meticulously applying the collection rates sustained by the EU for the individual installments, the counter rose to about 66.4 billion, spread between August 2021, when the advance installment was collected, and 2057, when the repayment of the last two installments, which we will probably collect in 2026, will end.
The second bad news is that those 66 billion collected by the EU and transferred to Italy have an average maturity of 11 years, but the loan granted to Italy has a maturity of 30 years and is therefore exposed to interest rate fluctuations as set by the ECB. And the most likely scenario could be an increase.
If these are the premises, the final result is reading in the statements that the MEF issues on the occasion of each installment collection, an embarrassing “to be determined,” referring to the interest rate and yield at maturity. This is because the determination is left to a very intricate series of calculations that we try to explain here. While to understand the rates of a BOT or BTP issuance, middle school is enough.
Imagine a tank with a tap into which the Commission repeatedly pours, over the course of a semester, the proceeds from bond issuances; then imagine that during that same semester the Member States were authorized to collect a PNRR installment. At that point, the “water” is withdrawn, the tank empties, and carries with it for 30 years the average cost of all the issuances poured into that tank, calculated day by day. The plan is structured so that all the “tanks” filled every semester (the so-called temporal compartments) are precisely emptied by the payments to the Member States. Any surpluses or shortages are compensated by “transferring” from the tanks related to other semesters.
Once this step is understood, the rest is all downhill, albeit humiliating for a country like Italy that has never lost access to the markets and that in 2025 issued 550 billion with ease, attracting investors from all over the world. With the huge difference of not having to account to Brussels for the destination of those sums.
Each installment has an initial financing rate that is the result of the average of all issuances ended in each tank, from short-term bonds (within 12 months) to 30-year bonds, passing through all intermediate maturities.
And here a problem arises: since the average duration of those issuances is 11 years and the repayments by Member States will start 10 years after disbursement and will be distributed in constant quotas over the following 20 years, the Commission will necessarily have to refinance the maturing bonds multiple times until 2057, when all Member States’ repayments will be completed. This explains why the MEF does not know the interest rate of each installment and why that 0.15% rate on the first installment is destined to rise significantly as the bonds in that “tank” mature and the EU will have to refinance them.
The final rate will only be known when the last refinancing of the bonds ended in the tank has been executed. And in 30 years anything can happen. We are therefore at the scandalous cornerstone: the Commission has indisputably chosen an average maturity in fund raising significantly shorter than that of the loans granted, thus exposing debtor countries to interest rate risk.
At this point comes the usual objection that, with equal maturities, the rates obtained by the EU on the market since 2021 have been slightly lower than those of our government bonds, and therefore Italy saved by financing with the EU compared to what it would have paid issuing public securities. Objection rejected because, assuming that in 2025 the difference almost disappeared, Italy could well have chosen to issue bonds with a different average maturity and thus be less exposed to interest rate risk or buy hedges.
For example, in 2021 Italy issued 78 billion using BTPs with maturities of 10, 15, 20, and 30 years, with rates ranging from 0.80% for 10 years to 1.75% for 30 years. What would have prevented Italy from raising those 16 billion advance received from Brussels on equally long maturities and at such a low rate that today seems like science fiction, and closing the interest account there until 2057, moreover with the ECB as the sole buyer? Why did the EU raise funds with a relatively low average maturity when it knew the loans were for 30 years?
But the bill does not end here. Because so-called liquidity management costs also mushroom: since the EU must always have sufficient liquidity to satisfy Member States’ disbursement requests, it is forced to raise money in advance and hold it waiting. If, as happened, payment requests are delayed, that liquidity not only does not yield, but in a context of rising rates, becomes a cost, directly charged to Member States (195 million in the first half of 2025 alone).
Still convinced that allowing the Commission to play the “small banker” – with Italy as almost the only client with its 99 billion out of 156 disbursed – was a good deal?
