The aggressive government-led securitizations that have propelled volumes in Italian securitization to record levels have equally served to effectively reduce government deficit levels to Maastricht debt criteria levels.

But just as things are starting to come together, Eurostat officials are said to be designing a task force that will investigate whether these deals are admissible in reducing the public deficit levels.

The Maastricht debt criteria requires countries in the European Monetary Unit to reach and maintain budget deficit levels of 3% of GDP and restrict and maintain public debt/GDP ratios to 60%. Last year's result placed the public deficit-GDP at 1.4%.

News of the task force comes simultaneously with Bank of Italy's announcement that there are clear signs that the eurozone and Italian economies are recovering; the bank expects the Italian GDP to exhibit a quarter-on-quarter rise at the end of this first quarter. According to data released by the bank, securitizations were responsible for lowering 2001's public deficit by approximately EURO7 billion, which amounts to 0.6% of the GDP.

It's a move that catches many by surprise, given the extensive and growing list of activity that the government has taken part in. "From our dealings, it did seem at the time that we rated these transactions that the government had an open dialogue with Eurostat," said one market analyst.

While it's still not clear what conclusion will be reached, a negative result would pose a problem to the Italian treasury. In line with last year's extensive securitizations, the treasury has a similar large program lined up for this year that is expected to include another massive real-estate transaction in the mix.

Interestingly, the aggressive activity last year left some market participants questioning if the market could eventually become over-saturated with this paper, but the appetite that met the year-end real estate transaction was enough to confirm that investors have not yet had enough.

As for any possible limits, analysts said last year that it was really a "non-issue" because Eurostat had recognized the deals as off-balance-sheet transactions. Additioanlly, no further specifics on the point of securitization existed. Eurostat has general guidelines, which are interpreted on a country-by-country basis, said one market source.

"Is [securitization] a solution?" asked one bank analyst. "No, because they are not generating new revenue. They are outsourcing revenue basically. The EU has not set a limit but maybe they will because like a telecom company, if [the government] starts selling all their receivables there will be a point where they are downgraded, because the revenue base they keep will not be enough to pay their existing debt.

"At some point maybe they should think about it before they securitize everything they have got."

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