Magütt Giorgetti’s construction fiasco involving banks and the Superbonus

During the hearing on the budget bill, Giancarlo Giorgetti slipped back into the role of a labourer (magütt, in Lombard), recalling the lesson he had learnt as a boy: “You don’t touch load-bearing walls, but you can touch partition walls, because they won’t bring the whole structure down”. The point is, precisely, that there are aspects of the budget bill that cannot be touched, whilst others can be amended by Parliament. The problem, however, is that whoever got their hands on the Budget Bill must not have been either an engineer or an experienced bricklayer – at least as far as the provision on the building Superbonus is concerned. They thought it was a partition wall, but it turned out to be a load-bearing wall.

“A ‘South American-style measure’,” said Carlo Messina, CEO of Intesa Sanpaolo, in very harsh terms. The reference is to Article 37 of the draft bill, which spreads the Superbonus tax credits over ten years: this concerns the final ‘maxi’ instalment, amounting to 20.5 billion euros, which the government has unilaterally decided to pay not in a single year but in ten manageable instalments of around 2 billion each. For the state, the gain is minimal: no impact on the deficit, given that the credits were issued and accounted for in 2023, and therefore no additional margin to spend; but an indirect benefit of 550–600 million in reduced interest expenditure due to the avoidance of issuing 18 billion in debt in 2027. That is not much, considering that interest expenditure in 2027 will amount to 103 billion. The bill is much steeper for creditors – mainly banks – who will have to record a write-down of approximately 3 billion euros on their balance sheets.

This is a very sensitive issue, not only because of the economic consequences for the banks but also because of the reputational implications for the state. In the 3 November edition of Il Foglio, we wrote that this amounted to a ‘debt restructuring’, or in other words, a ‘default’. The Italian Banking Association (ABI), during its hearing on 10 November, aware of the sensitivity of the matter, had been more diplomatic: the measure “would appear to be tantamount to a forced restructuring of government debt”. But evidently the political class failed to grasp this. Thus, during Thursday’s hearing, Messina cut straight to the chase by evoking the scenario of an Italian default: “It is a South American-style debt management measure”. 

“It’s unbelievable,” said the CEO of Intesa Sanpaolo. In the ECB’s terminology, this is called ‘forbearance’; it is a technical measure that will lead banks to classify this as a default, with the risk that this could trigger a cross-default on all Italian government debt.” Messina outlined a scenario of extreme risk for the Treasury, precisely to emphasise that one cannot intervene so brutally on such sensitive matters. Of course, the CEO of Intesa has no interest in raising the spectre of a BTP default, given that Italian banks (and Intesa above all) are the main holders of public debt: undermining the credibility of the state as a debtor means devaluing the 600 billion in government bonds held by the bank as a creditor. The point, therefore, is that “there could have been better solutions for obtaining liquidity”, Messina emphasised.

Presumably, the bricklayer who came up with the ‘Spalma-Superbonus’ must have thought that the scheme worked in a similar way to deferred tax assets (DTAs). In that case too, after all, it involves the suspension until 2027 (in addition to those already established for 2025 and 2026) of tax deductions amounting to 2 billion. In both instances, in short, we are dealing with a state entitlement (deduction or credit) that entitles the holder to avoid paying tax on the corresponding amount. If DTAs can be deferred, then the Superbonus can also be spread out over time.

The problem, however, is that they are by no means the same thing under international accounting standards and the ECB’s supervisory rules to which banks must adhere. These are two different accounting items, with very different consequences. DTAs are classified under ‘taxes’ and their deferral does not imply the recognition of a loss. Whereas Superbonus receivables must be recorded under item 140 of the profit and loss account: ‘Gains/losses from contractual amendments without write-offs’, resulting in a write-down with implications for liquidity and, indeed, the profit and loss account. ‘Someone probably thought the impact was the same as under the rules on DTAs,’ says an expert in the field. But this is by no means the case. The damage is direct for the banks, but it could also be enormous for the state. This is because it is unclear whether accounting standards and EBA/ECB rules require banks to classify the debtor (i.e. the state) as insolvent. And one difference compared to the deferral of DTAs lies in the fact that the latter was established following an agreement with the banks, whilst the Superbonus deferral is a unilateral decision by the debtor.

The ECB was not consulted by the government on this measure. Not that there was any obligation to consult it, but this suggests that whoever drafted the legislation did not fully grasp the sensitivity of the matter and its implications, given that there was no prior consultation with either the banks or the regulatory authorities.

These critical issues had already been highlighted during a parliamentary hearing, in cautious and measured terms, by Marco Elio Rottigni, Director-General of the Italian Banking Association (ABI), but they had evidently not been taken on board. Messina was far more explicit, referring to a ‘South American-style regulation’ that risks leading the country into ‘default’. The issue, framed in these terms, was better understood, not least because it made its way into the international press and onto the radar of investors and rating agencies.

Politicians have also taken notice. “The signal to the financial markets is terrible,” says Antonio Misiani, the PD’s economic spokesperson. “The government must backtrack and scrap this provision.” But even within the government, given what is at stake, the idea of revising the provision is gaining ground. Signs to this effect have come both from Giorgetti and from yesterday’s meeting at Palazzo Chigi with the social partners. Otherwise, the matter will end up before the Constitutional Court, but with the possibility of a more immediate penalty on the markets.

In short, there is a risk that the whole thing could come crashing down. So it is high time that Giorgetti shored up the load-bearing wall before it is too late.