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Italian Treasury: no plans for mini-BOT scheme and it is not needed

ROME (Reuters) - The Italian government has no plans to issue small denomination bonds to help pay state debts owed to companies, the Treasury said on Friday, looking to quell market concerns that Rome may introduce a parallel currency.

The so-called “mini-BOT” scheme, named after Italy’s Treasury bills, was drawn up by the ruling League party, and on Tuesday parliament approved a motion saying it should be considered as a way of reducing the backlog of state debts to suppliers.

Most parliamentary motions are never translated into bills or laws.

“There is no need, and no measures of any type are being considered -- certainly not the issue of small denomination state bonds -- to tackle any supposed delays in payments by the public administration,” the Treasury said in a statement.

Some traders cited concern over the mini-BOT scheme as a reason for a rise in Italian government bond yield spreads on Friday.

The Treasury said that in 2018 some 20 million bills were paid by the public administration and, on average, these were settled one day inside the legal limit of 60 days.

This marks a “constant improvement” compared with the situation two years ago, when bills were settled with an average delay of 16 days, it said.

The architect of mini-BOTs is Claudio Borghi, the League’s economics spokesman, who is also a long-time critic of the euro and has said the scheme would help the economy to keep functioning if Italy quit the single currency.

Under his original plan, drawn up a few years ago, initially some 70 billion euros ($78.02 billion) of these small denomination, interest-free bonds would be issued by the Treasury to firms and individuals owed money by the state as payment for services or as tax rebates.

They could then be used as money to pay taxes and buy any services or goods provided by the state, including, for example, petrol at stations run by state-controlled oil company ENI.

The scheme features in the policy program, or “contract” drawn up by the right-wing League and the anti-establishment 5-Star Movement when they formed a government 12 months ago, though it is couched in vague terms.

The contract describes mini-BOTs as “among the measures that could be adopted” to reduce the backlog of debts owed by the state to individual tax-payers and companies.

Reporting by Gavin Jones; Editing by Frances Kerry