Italy risks eight billion in derivatives losses, says FT

Restructuring of contracts during euro crisis may prove costly

Italy risks eight billion in derivatives losses, says FT

Rome, June 26 - Italy risks losing as much as eight billion euros on derivatives contracts that were restructured at the height of the eurozone crisis, according to a report by the Financial Times. The FT said the losses could stem from the restructuring of eight derivatives contracts with foreign banks with an overall value of 31.7 billion euros in the first half of last year documents in a Treasury report. The restructuring made it possible for the Italian Treasury to stagger payments on the contracts over a longer period but at more disadvantageous terms in some cases. The original contracts appear to have been stipulated in the 1990s, the FT said, when the Italian government was trying to make its national accounts look better by taking upfront payments from banks in order to meet the deficit targets needed to be among the first wave of 11 countries that adopted the euro in 1999. The report did not say how big the losses could be, but the FT calculated that they could amount to eight billion after consulting three independent experts. If the report is true, the losses will be another headache for Premier Enrico Letta, who is already struggling to find cash to fund several policy goals.

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