EX-99.6 7 u48750exv99w6.htm EX-6 exv99w6
 

Exhibit 6

Recent Developments update dated May 27, 2005

 

 

RECENT DEVELOPMENTS

The Italian Economy

     Italy’s real GDP decreased at a seasonally adjusted rate of 0.4 per cent in the last quarter of 2004 and grew at an annual rate of 0.8 per cent during the year ended December 31, 2004, based on ISTAT data. Italy’s seasonally adjusted average unemployment rate decreased to 8.0 per cent during the last quarter of 2004 from 8.1 per cent during the second and third quarters of 2004. Consumer prices, as measured by the harmonized EU consumer price index, increased at an annual rate of 2.2 per cent during the twelve months ended April 30, 2005.

Public Finance

     On March 18, 2005, Eurostat, the European Commission statistical authority, published a press release detailing government deficit and debt data for the years 2001 through 2004 (including partial estimates for 2004) transmitted by the 25 EU Member States to the Commission as part of the March 1 reporting round under relevant EU regulations. The press release included the following data for Italy:

                                 
    2001     2002     2003     2004  
Primary balance, as a percentage of GDP
     3.6       3.2       2.4       2.0  
Public debt (in million euro)
     1,348,360       1,362,074       1,383,088       1,429,917  
Public debt, as a percentage of GDP
     110.7       108.0       106.3       105.8  
Net borrowing (in million euro)
     35,963       32,656       37,792       40,877  
Net borrowing, as a percentage of GDP
     3.0       2.6       2.9       3.0  
GDP (nominal value, in million euro)
     1,218,535       1,260,598       1,300,928       1,351,794  

Source: Eurostat

     Eurostat noted that all such data transmitted by Member States is subject to revision, notably through a further data submission due by September 1, 2005. With respect to Italy, Eurostat noted it was engaged in ongoing discussions with ISTAT, the Italian statistical authority, that could lead to an upward revision in Italy’s net borrowing statistics, most notably for 2003 and 2004. These ongoing discussions related to the recording of payments to the Italian government by financial institutions that act as tax collectors (concessionari d’imposta), the sectoral classification of government-owned entities, the treatment of a government securitisation operation, the recording of transactions with the EU budget, inconsistencies between data on cash and accrual bases and statistical discrepancies in government accounts.

     On April 28, 2005, the government announced an update to the Annual Program Report for 2005 (Relazione Previsionale e Programmatica per il 2005) dated September 29, 2004, providing the following revised public finance indicators:

 

 

                 
    2004     2005  
    (Result)     (Target)  
Primary balance, as a percentage of GDP
     2.0       2.1  
Interest expense, as a percentage of GDP
     5.0       5.0  
Net borrowing, as a percentage of GDP
     3.0       2.9  
Public debt, as a percentage of GDP
     105.8       105.3  
GDP (% real growth rate)
     1.2       1.2  

Source: Ministry of Economy and Finance

     On May 23, 2005, following the discussions with ISTAT described above, Eurostat announced upward revisions to Italy’s budget deficit and public debt data for 2003 and 2004. Eurostat noted that it continued to be engaged in discussions with Italian authorities relating to the recording of transactions with the EU budget, inconsistencies between data on cash and accrual bases and statistical discrepancies in government accounts, which could lead to a further upward revision in Italy’s budget deficit for the period between 2001 and 2004.

On May 24, 2005, ISTAT released revised budget deficit and public debt data for the four year period ended December 31, 2004, accounting for Eurostat's decisions. Italy's budget deficit, as a percentage of GDP, was provisionally set at 0.8 per cent in 2000, 3.2 per cent in 2001, 2.7 per cent in 2002 and 3.2 per cent in 2003 and 2004. Public debt, as a percentage of GDP, was provisionally set at 111.3 per cent in 2000, 110.9 per cent in 2001, 108.3 per cent in 2002, 106.8 per cent in 2003, and 106.6 per cent in 2004.

Public Debt

     The following table shows the total debt incurred by the Treasury as of the dates indicated. Total debt incurred by the Treasury differs from Italy’s total public debt as it does not include liabilities to holders of postal savings accounts and debt incurred by other state sector entities and other general government entities.

                 
    December 31, 2004     March 31, 2005  
    (millions of euro)  
Short term bonds (BOT)
     118,750       129,750  
Medium and long term bonds (initially incurred or issued in Italy)
     979,506       1,023,929  
External bonds (initially incurred or issued outside Italy)(1)
     85,988       87,397 (2)(3)
 
            
Total debt incurred by the Treasury
     1,184,244       1,241,076  
 
            

(1)   Italy often enters into currency swap agreements in the ordinary course of the management of its debt. The total amount of external bonds shown above takes into account the effect of these arrangements. In addition, the total amount of external bonds shown above includes US$989 million of debt originally incurred outside Italy by Ferrovie dello Stato S.p.A., or FS, the State railway entity, and assumed by the Treasury by law in 1996.
 
(2)   The total amounts of external bonds shown above include approximately US$355 million in obligations outstanding at March 31, 2005 under Italy’s €10 billion Commercial Paper program, with maturity of less than one year. All amounts of debt outstanding under Italy’s Commercial Paper program are repaid in full every year by year-end. Accordingly, as at December 31, 2004 Italy had no amount outstanding under its Commercial Paper program.
 
(3)   The amount of external bonds shown above is not directly comparable to the total amount of external bonds indicated in the table “External Bonds of the Treasury as of March 31, 2005” below, which does not take into account (i) the effect of currency swaps, (ii) FS debt incurred outside Italy and (iii) Italy’s Commercial Paper program.
 
Source: Ministry of Economy and Finance

     The following table shows the external bonds of the Treasury issued and outstanding as of March 31, 2005.

 

 

External Bonds of the Treasury
as of March 31, 2005

                                                         
                                            Principal        
            Initial Public                   Original Principal     Amount     Equivalent in  
Title   Interest Rate(%)   Offering Price   Date of Issue   Maturity Date   Amount     Outstanding     euro  
US$(1)
                                                        
$3,500,000,000
     6.875 %     98.725 %   September 27, 1993   September 27, 2023     3,500,000,000       3,500,000,000       2,699,784,017  
$1,500,000,000
     6.025%-6.88 %     100.000 %   March 5, 1996   Mar 5, 2004/12     1,500,000,000       1,500,000,000       1,157,050,293  
$750,000,000
     5.81%-6.70 %     100.000 %   March 5, 1996   Mar 5, 2002/10     750,000,000       750,000,000       578,525,147  
$1,500,000,000
     5.97% -6.25 %     100.000 %   December 20, 1996   Dec 20, 2004/12     1,500,000,000       1,500,000,000       1,157,050,293  
$2,500,000,000
     6.000 %     99.755 %   May 29, 1998   May 29, 2008     2,500,000,000       2,500,000,000       1,928,417,155  
$2,000,000,000
     6.000 %     99.274 %   February 22, 2001   February 22, 2011     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     5.250 %     99.506 %   April 5, 2001   April 5, 2006     2,000,000,000       2,000,000,000       1,542,733,724  
$100,000,000
     5.000 %     99.635 %   May 15, 2001   May 15, 2005     100,000,000       100,000,000       77,136,686  
$3,000,000,000
     4.375 %     99.468 %   October 25, 2001   October 25, 2006     3,000,000,000       3,000,000,000       2,314,100,586  
$2,000,000,000
     4.375 %     98.007 %   January 28, 2002   October 25, 2006     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     5.625 %     99.893 %   March 1, 2002   June 15, 2012     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     4.625 %     99.594 %   March 22, 2002   June 15, 2005     2,000,000,000       2,000,000,000       1,542,733,724  
$1,000,000,000
     5.625 %     99.392 %   May 8, 2002   June 15, 2012     1,000,000,000       1,000,000,000       771,366,862  
$300,000,000
 3 mth libor - 0.065 %     100.000 %   August 1, 2002   August 1, 2007     300,000,000       300,000,000       231,410,059  
$3,000,000,000
     3.625 %     99.721 %   September 4, 2002   September 4, 2007     3,000,000,000       3,000,000,000       2,314,100,586  
$3,000,000,000
     2.500 %     99.767 %   January 30, 2003   March 31, 2006     3,000,000,000       3,000,000,000       2,314,100,586  
$2,000,000,000
     5.375 %     98.436 %   February 27, 2003   June 15, 2033     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     4.375 %     99.694 %   February 27, 2003   June 15, 2013     2,000,000,000       2,000,000,000       1,542,733,724  
$1,250,000,000
     3.250 %     99,949 %   May 6, 2003   May 6, 2008     1,250,000,000       1,250,000,000       964,208,578  
$2,000,000,000
     2.500 %     99.521 %   July 3, 2003   July 15, 2008     2,000,000,000       2,000,000,000       1,542,733,724  
$3,000,000,000
     2.750 %     99.901 %   November 13, 2003   December 15, 2006     3,000,000,000       3,000,000,000       2,314,100,586  
$100,000,000
     4.170 %     100.000 %   November 14, 2003   November 15, 2010     100,000,000       100,000,000       77,136,686  
$100,000,000
     4.060 %     100.000 %   December 9, 2003   December 9, 2010     100,000,000       100,000,000       77,136,686  
$2,000,000,000
     2.75 %     100.239 %   January 14, 2004   December 15, 2006     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     3.25 %     99.515 %   March 3, 2004   May 15, 2009     2,000,000,000       2,000,000,000       1,542,733,724  
$2,000,000,000
     3.75 %     99.783 %   June 30, 2004   December 14, 2007     2,000,000,000       2,000,000,000       1,542,733,724  
$4,000,000,000
     4.50 %     99.411 %   January 21, 2005   January 21, 2015     4,000,000,000       4,000,000,000       3,085,467,448  
Euro(2)
                                                        
€1,000,000,000
   3 mth libor     100.000 %   October 30, 1990   October 30, 2005     1,000,000,000       1,000,000,000       1,000,000,000  
€2,500,000,000
     9.250 %     98.160 %   March 7, 1991   March 7, 2011     2,500,000,000       2,500,000,000       2,500,000,000  
€1,022,583,762
 3 mth libor+ 0.0625 %     99.887 %   December 11, 1995   December 20, 2002/10     1,022,583,762       1,022,583,762       1,022,583,762  
€567,225,275
     6.250 %     100.790 %   May 29, 1997   May 29, 2012     567,225,275       567,225,275       567,225,275  
€762,245,086
     5.875 %     101.594 %   July 2, 1997   July 2, 2007     762,245,086       762,245,086       762,245,086  
€1,533,875,644
     5.750 %     101.663 %   July 10,1997   July 10, 2007     1,533,875,644       1,533,875,644       1,533,875,644  
€60,000,000
   FRN/FX     99.610 %   October 8, 1998   October 8, 2018     60,000,000       60,000,000       60,000,000  
€300,000,000
   Index linked     101.425 %   October 15, 1998   October 15, 2018     300,000,000       300,000,000       300,000,000  
€1,000,000,000
     4.000 %     99.342 %   October 26, 1998   October 26, 2005     1,000,000,000       1,000,000,000       1,000,000,000  
€1,000,000,000
   CMS     99.950 %   May 6, 1999   May 6, 2019     1,000,000,000       1,000,000,000       1,000,000,000  

 

 

                                                         
                                            Principal        
            Initial Public                   Original Principal     Amount     Equivalent in  
Title   Interest Rate(%)   Offering Price   Date of Issue   Maturity Date   Amount     Outstanding     euro  
€1,000,000,000
   CMS     101.600 %   June 28, 1999   June 28, 2029     1,000,000,000       905,000,000       905,000,000  
€1,000,000,000
   CMS     100.750 %   August 30, 1999   August 30, 2019     1,000,000,000       1,000,000,000       1,000,000,000  
€2,000,000,000
     4.750 %     99.706 %   January 23, 2001   January 23, 2006     2,000,000,000       2,000,000,000       2,000,000,000  
€150,000,000
   Zero Coupon     100.000 %   February 20, 2001   February 20, 2031     150,000,000       150,000,000       150,000,000  
€3,000,000,000
     5.750 %     100.040 %   July 25, 2001   July 25, 2016     3,000,000,000       3,000,000,000       3,000,000,000  
€400,000,000
 3 mth libor – 0.06 %     100.000 %   January 22, 2002   January 22, 2012     400,000,000       400,000,000       400,000,000  
€1,000,000,000
 3 mth euribor – 0.06 %     100.000 %   July 24, 2003   January 24, 2007     1,000,000,000       1,000,000,000       1,000,000,000  
€150,000,000
   84.5% cms 10Y     100.000 %   April 26, 2004   April 26, 2019     150,000,000       150,000,000       150,000,000  
Swiss Francs(3)
                                                        
ChF 300,000,000
   Zero Coupon     30.873 %   December 11, 1985   December 11, 2005     300,000,000       300,000,000       193,723,363  
ChF 1,000,000,000
     3.500 %     102.900 %   September 25, 1998   September 25, 2008     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,500,000,000
     3.125 %     99.825 %   January 15, 1999   July 15, 2010     1,500,000,000       1,500,000,000       968,616,815  
ChF 1,000,000,000
     3.625 %     100.820 %   January 10, 2001   January 10, 2006     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,000,000,000
     3.000 %     100.180 %   February 11, 2002   August 11, 2006     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,000,000,000
     2.000 %     100.470 %   January 30, 2003   April 30, 2009     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,000,000,000
     1.250 %     99.775 %   August 11, 2003   February 9, 2007     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,000,000,000
     1.750 %     100.090 %   February 3, 2004   March 3, 2008     1,000,000,000       1,000,000,000       645,744,543  
ChF 1,000,000,000
     2.750 %     100.625 %   July 1, 2004   July 1, 2011     1,000,000,000       1,000,000,000       645,744,543  
ChF 2,000,000,000
     2.50 %     100.09 %   February 2, 2005   March 2, 2015     2,000,000,000       2,000,000,000       1,291,489,087  
Pounds Sterling(4)
                                                        
£400,000,000
     10.500 %     100.875 %   April 28, 1989   April 28, 2014     400,000,000       400,000,000       580,973,130  
£1,500,000,000
     6.000 %     98.565 %   August 4, 1998   August 4, 2028     1,500,000,000       1,500,000,000       2,178,649,237  
£105,000,000
 6mth libor – 0.3 %     99.700 %   May 2, 2000   May 2, 2005     105,000,000       105,000,000       152,505,447  
£600,000,000
 3mth libor – 0.15 %     100.000 %   March 5, 2003   March 5, 2008     600,000,000       600,000,000       871,459,695  
£250,000,000
     5.25 %     99.476 %   July 29, 2004   December 7, 2034     250,000,000       250,000,000       363,108,206  
Norwegian Kroners(5)
                                                        
NOK 2,000,000,000
     6.150 %     100.000 %   September 25, 2002   September 25, 2012     2,000,000,000       2,000,000,000       243,724,104  
NOK 2,000,000,000
     4.34 %     100.000 %   June 23, 2003   June 23, 2015     2,000,000,000       2,000,000,000       243,724,104  
Japanese Yen(6)
                                                        
¥125,000,000,000
     5.500 %     100.000 %   December 15, 1994   December 15, 2014     125,000,000,000       125,000,000,000       902,918,232  
¥225,000,000,000
     3.750 %     100.000 %   June 8, 1995   June 8, 2005     225,000,000,000       225,000,000,000       1,625,252,817  
¥125,000,000,000
     4.500 %     100.000 %   June 8, 1995   June 8, 2015     125,000,000,000       125,000,000,000       902,918,232  
¥150,000,000,000
     3.800 %     100.000 %   April 4, 1996   March 27, 2008     150,000,000,000       150,000,000,000       1,083,501,878  
¥100,000,000,000
     3.700 %     100.000 %   November 14, 1996   November 14, 2016     100,000,000,000       100,000,000,000       722,334,585  
¥100,000,000,000
     3.450 %     99.800 %   March 24, 1997   March 24, 2017     100,000,000,000       100,000,000,000       722,334,585  
¥100,000,000,000
     1.800 %     99.882 %   February 23, 2000   February 23, 2010     100,000,000,000       100,000,000,000       722,334,585  
¥100,000,000,000
     0.375 %     99.936 %   October 10, 2001   October 10, 2006     100,000,000,000       100,000,000,000       722,334,585  
¥100,000,000,000
     0.375 %     99.800 %   April 2, 2002   October 10, 2006     100,000,000,000       100,000,000,000       722,334,585  

 

 

                                                         
                                            Principal        
            Initial Public                   Original Principal     Amount     Equivalent in  
Title   Interest Rate(%)   Offering Price   Date of Issue   Maturity Date   Amount     Outstanding     euro  
¥100,000,000,000
     0.650 %     99.995 %   April 14, 2004   March 20, 2009     100,000,000,000       100,000,000,000       722,334,585  
Australian Dollar(7)
                                                        
A$1,000,000,000
     5.88 %     99.803 %   February 27, 2004   August 14, 2008     1,000,000,000       1,000,000,000       596,551,930  
 
                                                      
TOTAL OUTSTANDING
                                                     78,435,428,582 (8)
 
                                                      

(1)   U.S. dollar amounts have been converted into euro at $1.2964/€1.00, the exchange rate prevailing at March 31, 2005.
(2)   External debt denominated in currencies of countries that have adopted the euro have been converted into euro at the fixed rate at which those currencies where converted into euro upon their issuing countries becoming members of the European Monetary Union.
(3)   Swiss Franc amounts have been converted into euro at ChF1.5486/€1.00, the exchange rate prevailing at March 31, 2005.
(4)   Pounds Sterling amounts have been converted into euro at £0.6885/€1.00, the exchange rate prevailing at March 31, 2005.
(5)   Norwegian Kroner amounts have been converted into euro at NOK8.206/€1.00, the exchange rate prevailing at March 31, 2005.
(6)   Japanese Yen amounts have been converted into euro at ¥138.44/€1.00, the exchange rate prevailing at March 31, 2005.
(7)   Australian Dollar amounts have been converted into euro at A$1.6763/€1.00, the exchange rate prevailing at March 31, 2005.
(8)   Italy often enters into swap agreements in the ordinary course of the management of its debt. The total amount shown above does not give effect to these arrangements. The following table summarizes the effects on the Treasury’s external bonds after giving effect to currency swaps. Total external bonds before and after swap do not include US$989 million of debt originally incurred outside Italy by FS and assumed by the Treasury by law in 1996.
                   
      As of March 31, 2005  
  Currency   Before Swap     After Swap  
 
US Dollars
     49.76 %     6.25 %
 
Euro
     23.40 %     69.93 %
 
Swiss Francs
     8.89 %     9.18 %
 
Pounds Sterling
     5.29 %     3.48 %
 
Norwegian Kroner
     0.62 %     —  
 
Japanese Yen
     11.28 %     11.15 %
 
Australian Dollar
     0.76 %     —  
 
Total External Bonds (in millions of Euro)
   € 78,435     € 86,360  

Source: Ministry of Economy and Finance

Political Developments

     On April 3 and 4, 2005, Italy held elections for regional councils in 14 out of its 20 regions. Mr. Romano Prodi’s centre-left coalition won these elections in 12 regions with an aggregate 52.4 per cent of the votes, while Mr. Berlusconi’s Casa delle Libertà attained an aggregate 44.2 per cent of the votes, with a relative majority in two regions. As a result, one of the smaller parties in the Casa delle Libertà coalition withdrew support from Mr. Berlusconi’s national government and Mr. Berlusconi resigned as Prime Minister on April 20, 2005. Mr. Berlusconi was subsequently appointed by Mr. Ciampi, Italy’s President, to form a new government. With the renewed support of the smaller Casa delle Libertà party that had withdrawn its support for the previous government, Mr. Berlusconi formed a new government that was sworn in on April 24, 2005 and that received a vote of confidence by a majority of Parliament on April 27, 2005.