EX-1 2 u49789exv1.htm EXHIBIT 1 - RECENT DEVELOPMENTS UPDATE DATED JANUARY 18, 2006 exv1
 

Exhibit 1
Recent Developments update dated January 18, 2006

 

 

Recent Developments
Exhibit 1
Recent Developments Update Dated January 18, 2006
     The information included in this section supplements the information about the Republic of Italy that is contained in Exhibit D to the Republic’s annual report on Form 18-K, as amended, for the fiscal year ended December 31, 2003. To the extent that the information included in this section differs from the information set forth in the annual report, you should rely on the information in this section.
The Italian Economy
     Based on ISTAT data, Italy’s real GDP increased at a seasonally adjusted rate of 0.3 per cent in the third quarter of 2005 and grew at an annual rate of 0.1 per cent during the year ended September 30, 2005. Italy’s seasonally adjusted average unemployment rate was stable at 7.7 per cent during the second and third quarters of 2005, from 7.8 per cent during first quarter of 2005. Consumer prices, as measured by the harmonized EU consumer price index, increased at an annual rate of 2.0 per cent during the twelve months ended December 31, 2005.
Public Finance
The 2004 Stability and Growth Program
     In December 2005 Italy presented the update to its stability and growth program for the period 2005-2009 (“2005 Stability Program”) to the EU Commission. The following table compares the principal finance indicators included in the 2004 Stability Program and the 2005 Stability Program:
COMPARATIVE TABLE
2004 STABILITY PROGRAM AND 2005 STABILITY PROGRAM TARGETS
                                         
    2004     2005     2006     2007     2008  
Real GDP growth rate
                                        
2004 Stability Program
     1.2       2.1       2.2       2.3       2.3  
2005 Stability Program
     1.2       —       1.5       1.5       1.7  
Difference
     —       (2.1 )     (0.7 )     (0.8 )     (0.6 )
Net Borrowing, as a % of GDP
                                        
2004 Stability Program
     2.9       2.7       2.0       1.4       0.9  
2005 Stability Program
     3.2       4.3       3.5       2.8       2.1  
Difference
     0.3       1.6       1.5       1.4       1.2  
Public Debt, as a % of GDP
                                        
2004 Stability Program
     106.0       104.1       101.9       99.2       98.0  
2005 Stability Program
     106.5       108.5       108.0       106.1       104.4  
Difference
     0.5       4.4       6.1       6.9       6.4  
 
    Source: 2005 Stability Program
Public Debt — External Bonds of the Treasury
     The following table shows the external bonds of the Treasury issued and outstanding as of December 31, 2005.
EXTERNAL BONDS OF THE TREASURY
AS OF DECEMBER 31, 2005
                                                     
        Initial Public                     Original Principal     Principal Amount        
Title   Interest Rate(%)   Offering Price     Date of Issue     Maturity Date     Amount     Outstanding     Equivalent in 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       2,966,855,980  
$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       1,271,509,706  
$750,000,000
   5.81%-6,70%     100.000 %   March 5, 1996   Mar 5, 2002/10     750,000,000       750,000,000       635,754,853  
$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       1,271,509,706  
$2,500,000,000
   6.000%     99.755 %   May 29, 1998   May 29, 2008     2,500,000,000       2,500,000,000       2,119,182,843  
$2,000,000,000
   6.000%     99.274 %   February 22, 2001   February 22, 2011     2,000,000,000       2,000,000,000       1,695,346,274  
$2,000,000,000
   5.250%     99.506 %   April 5, 2001   April 5, 2006     2,000,000,000       2,000,000,000       1,695,346,274  
$3,000,000,000
   4.375%     99.468 %   October 25, 2001   October 25, 2006     3,000,000,000       3,000,000,000       2,543,019,412  
$2,000,000,000
   4.375%     98.007 %   January 28, 2002   October 25, 2006     2,000,000,000       2,000,000,000       1,695,346,274  
$2,000,000,000
   5.625%     99.893 %   March 1, 2002   June 15, 2012     2,000,000,000       2,000,000,000       1,695,346,274  
$1,000,000,000
   5.625%     99.392 %   May 8, 2002   June 15, 2012     1,000,000,000       1,000,000,000       847,673,137  
$300,000,000
   3 mth libor - 0.065%     100.000 %   August 1, 2002   August 1, 2007     300,000,000       300,000,000       254,301,941  
$3,000,000,000
   3.625%     99.721 %   September 4, 2002   September 4, 2007     3,000,000,000       3,000,000,000       2,543,019,412  
$3,000,000,000
   2.500%     99.767 %   January 30, 2003   March 31, 2006     3,000,000,000       3,000,000,000       2,543,019,412  
$2,000,000,000
   5.375%     98.436 %   February 27, 2003   June 15, 2033     2,000,000,000       2,000,000,000       1,695,346,274  
$2,000,000,000
   4.375%     99.694 %   February 27, 2003   June 15, 2013     2,000,000,000       2,000,000,000       1,695,346,274  
$1,250,000,000
   3.25%     99.949 %   May 6, 2003   May 6, 2008     1,250,000,000       1,250,000,000       1,059,591,422  
$2,000,000,000
   99.52%     99.521 %   July 3, 2003   July 15, 2008     2,000,000,000       2,000,000,000       1,695,346,274  
$3,000,000,000
   2.75%     99.901 %   November 13, 2003   December 15, 2006     3,000,000,000       3,000,000,000       2,543,019,412  
$100,000,000
   4.17%     100.000 %   November 14, 2003   November 15, 2010     100,000,000       100,000,000       84,767,314  
$100,000,000
   4.06%     100.000 %   December 9, 2003   December 9, 2010     100,000,000       100,000,000       84,767,314  
$2,000,000,000
   2.75%     100.239 %   January 14, 2004   December 15, 2006     2,000,000,000       2,000,000,000       1,695,346,274  

 

 

                                                     
          Initial Public                   Original Principal     Principal Amount        
Title   Interest Rate(%)     Offering Price     Date of Issue     Maturity Date   Amount     Outstanding     Equivalent in euro  
$2,000,000,000
   3.25%     99.515 %   March 3, 2004   May 15, 2009     2,000,000,000       2,000,000,000       1,695,346,274  
$2,000,000,000
   3.75%     99.783 %   June 30, 2004   December 14, 2007     2,000,000,000       2,000,000,000       1,695,346,274  
$4,000,000,000
   4.50%     99.411 %   January 21, 2005   January 21, 2015     4,000,000,000       4,000,000,000       3,390,692,549  
$3,000,000,000
   4.00%     99.932 %   May 9, 2005   June 16, 2008     3,000,000,000       3,000,000,000       2,543,019,412  
 
                                                    
Euro(2)
                                                    
 
                                                    
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  
567,225,000
   6.250%     100.790 %   May 29, 1997   May 29, 2012     567,225,000       567,225,000       567,225,000  
762,245,000
   5.875%     101.594 %   July 2, 1997   July 2, 2007     762,245,000       762,245,000       762,245,000  
1,533,870,000
   5.750%     101.663 %   July 10,1997   July 10, 2007     1,533,870,000       1,533,870,000       1,533,870,000  
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
   CMS     99.950 %   May 6, 1999   May 6, 2019     1,000,000,000       1,000,000,000       1,000,000,000  
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 eubor - 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  
300,000,000
   12 mth eubor + 0.10%     100.000 %   May 31, 2005   May 31, 2035     300,000,000       300,000,000       300,000,000  
720,000,000
   3.546% until 2009     100.000 %   June 2, 2005   June 2, 2029     720,000,000       720,000,000       720,000,000  
395,000,000
   3.523% until 2010     100.000 %   June 2, 2005   June 2, 2030     395,000,000       395,000,000       395,000,000  
200,000,000
   85% * 10y Eurswap     100.000 %   June 8, 2005   June 8, 2020     200,000,000       200,000,000       200,000,000  
2,500,000,000
   85% * 10y swap rate     100.000 %   June 15, 2005   June 15, 2020     2,500,000,000       2,500,000,000       2,500,000,000  
300,000,000
   85.5% * 10y swap rate     100.000 %   June 28, 2005   June 28, 2021     300,000,000       300,000,000       300,000,000  
200,000,000
   6m Eur + 1.5%
(max 10X
(cms10-cms2)		     100.000 %   November 9, 2005   November 9, 2025     200,000,000       200,000,000       200,000,000  
 
                                                    
Swiss Francs(3)
                                                    
 
                                                    
ChF 1,000,000,000
   3.500%     102.900 %   September 25, 1998   September 25, 2008     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,500,000,000
   3.125%     99.825 %   Jan 15,1999   July 15, 2010     1,500,000,000       1,500,000,000       964,568,195  
ChF 1,000,000,000
   3.625%     100.820 %   January 10, 2001   January 10, 2006     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,000,000,000
   3.000%     100.180 %   February 11, 2002   August 11, 2006     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,000,000,000
   2.000%     100.470 %   January 30, 2003   April 30, 2009     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,000,000,000
   2.000%     99.775 %   August 11, 2003   February 9, 2007     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,000,000,000
   1.750%     100.09 %   February 3, 2004   March 3, 2008     1,000,000,000       1,000,000,000       643,045,463  
ChF 1,000,000,000
   2.750%     100.625 %   July 1, 2004   July 1, 2011     1,000,000,000       1,000,000,000       643,045,463  
ChF 2,000,000,000
   2.500%     100.090 %   February 2, 2005   March 2, 2015     2,000,000,000       2,000,000,000       1,286,090,927  
 
                                                    
Pounds Sterling(4)
                                                    
 
                                                    
£400,000,000
   10.500%     100.875 %   April 28, 1989   April 30, 2014     400,000,000       400,000,000       583,685,977  
£1,500,000,000
   6.000%     98.565 %   August 4, 1998   August 4, 2028     1,500,000,000       1,500,000,000       2,188,822,414  
£600,000,000
   3 mth libor - 0.15%     100.000 %   March 5, 2003   March 5, 2008     600,000,000       600,000,000       875,528,965  
£250,000,000
   5.25%     99.476 %   July 29, 2004   December 7, 2034     250000000       250000000       364,803,736  

 

 

                                                     
        Initial Public                     Original Principal     Principal Amount        
Title   Interest Rate(%)   Offering Price     Date of Issue     Maturity Date     Amount     Outstanding     Equivalent in euro  
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       250,469,631  
NOK 2,000,000,000
   4.340%     100.000 %   June 23, 2003   June 23, 2015     2,000,000,000       2,000,000,000       250,469,631  
 
                                                    
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       899,928,006  
¥125,000,000,000
   4.500%     100.000 %   June 8, 1995   June 8, 2015     125,000,000,000       125,000,000,000       899,928,006  
¥150,000,000,000
   3.800%     100.000 %   April 4, 1996   March 27, 2008     150,000,000,000       150,000,000,000       1,079,913,607  
¥100,000,000,000
   3.700%     100.000 %   November 14, 1996   November 14, 2016     100,000,000,000       100,000,000,000       719,942,405  
¥100,000,000,000
   3.45%e     99.800 %   March 24, 1997   March 24, 2017     100,000,000,000       100,000,000,000       719,942,405  
¥100,000,000,000
   1.800%     99.882 %   February 23, 2000   February 23, 2010     100,000,000,000       100,000,000,000       719,942,405  
¥100,000,000,000
   0.375%     99.936 %   October 10, 2001   October 10, 2006     100,000,000,000       100,000,000,000       719,942,405  
¥100,000,000,000
   0.375%     99.800 %   April 2, 2002   October 10, 2006     100,000,000,000       100,000,000,000       719,942,405  
¥100,000,000,000
   0.650%     99.995 %   April 14, 2004   March 20, 2009     100,000,000,000       100,000,000,000       719,942,405  
 
                                                    
Australian Dollar(7)
                                                    
 
                                                    
A$1,000,000,000
   5.880%     99.803 %   February 27, 2004   August 14, 2008     1,000,000,000       1,000,000,000       620,770,998  
 
                                                  
TOTAL OUTSTANDING
                                             83,707,043,091 (8)
 
                                                  
 
(1)   U.S. dollar amounts have been converted into euro at $1.1797/€1.00, the exchange rate prevailing at December 30, 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 ChF1.5551/€1.00, the exchange rate prevailing at December 30, 2005.
 
(4)   Pounds Sterling amounts have been converted into euro at £0.6853/€1.00, the exchange rate prevailing at December 30, 2005.
 
(5)   Norwegian Kroner amounts have been converted into euro at NOK7.985/€1.00, the exchange rate prevailing at December 30, 2005.
 
(6)   Japanese Yen amounts have been converted into euro at ¥138.9/€1.00, the exchange rate prevailing at December 30, 2005.
 
(7)   Australian Dollar amounts have been converted into euro at A$1.6109/€1.00, the exchange rate prevailing at December 30, 2005.
 
(8)   The amount of external bonds shown above does not take into account the effect of currency swaps that Italy often enters into in the ordinary course of the management of its debt. The following table summarizes the effects on the Treasury’s external bonds after giving effect to currency swaps.
                 
    As of December 31, 2005        
Currency   Before Swap     After Swap  
US Dollars
     52.15 %     8.60 %
Euro
     25.05 %     70.30 %
Swiss Francs
     8.07 %     8.69 %
Pounds Sterling
     4.79 %     3.41 %
Norwegian Kroner
     0.60 %     —  
Japanese Yen
     8.60 %     9.00 %
Australian Dollar
     0.74 %     —  
Total External Bonds (in millions of Euro)
     €83,707       €88,637  
Source: Ministry of Economy and Finance
Other Developments
     As previously described in the Recent Developments Update dated November 8, 2005, filed under cover of Form 18-K/A no. 2 on November 16, 2005, with reference to the IRAP case pending before the ECJ, in order to avoid material adverse effects on Italy’s regional finances, the EU Advocate General requested that the ECJ limit the effects of its ruling from a temporal standpoint by reference to a fixed date. A hearing on this matter was held in December 2005.
     In September 2005, securities litigation was commenced against the Republic of Italy and a number of investment banking firms in the U.S. District Court for the Southern District of New York. This litigation, which sought class action status, alleged among other things that the registration statements used by the Republic of Italy in connection with its issuance of approximately $25 billion of debt securities between September 2002 and April 2005 contained certain misrepresentations and omissions relating to the size of Italy’s historical budget deficits and the amount of Italy’s debt as a

 

 

     percentage of gross national product. In this action, the plaintiff claimed an unspecified amount of compensatory damages, plus costs and fees.
     On January 9, 2006, the plaintiff entered a notice of voluntary dismissal without prejudice in respect of this lawsuit. Pursuant to the U.S. Federal Rules of Civil Procedure, any action dismissed without prejudice may be refiled at any time by the same or by a different plaintiff.
     It is not possible to predict whether this litigation will be refiled. However, as the Republic of Italy believes that it has valid defenses to these claims, even if this action is re-commenced, the Republic of Italy does not expect that this matter will have a material adverse effect on its financial position.