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Italy’s central bank chief has thinly veiled comments on EU plans to steal profits from Russian financial assets in Europe, saying “weaponization” of the euro risks undermining its appeal and boosting rival currencies such as the Chinese yuan. issued a warning.
Fabio Panetta, the new head of the Bank of Italy, said in a speech on Friday that Russia’s invasion of Ukraine was a “clear reminder” for Europe of the strategic benefits of having a world currency like the euro, adding: . Must be used wisely. ”
“International relations are part of a ‘repeating game’,” he said at an event in Riga to mark Latvia’s 10th anniversary of the introduction of the euro. “It will encourage the emergence of
He said the Chinese government is promoting the use of the renminbi in countries where international sanctions make it difficult to pay for goods in US dollars or euros. The growing use of the technology is “helpful in this regard,” he said. The renminbi’s share of China’s trade finance has doubled in the past three years, helping it overtake the euro as the world’s second most used currency for trade finance.
Panetta did not specifically mention the EU’s plan to transfer to Ukraine 210 billion euros in proceeds from Russian sovereign assets held in euro zone institutions and stuck by Western sanctions from 2022, but officials said said Panetta’s comments were made with these plans in mind.
Rome has frozen a relatively small amount of Russia’s central bank funds, most of which are stuck in Belgium, where central securities custodian Euroclear holds about 191 billion euros.
Brussels is working on a plan to seize the special profits Euroclear earns from its entrenched assets and give them to Ukraine. Member states are expected to approve new rules early next week requiring them to secure these benefits, but stop short of actually seizing them for Kiev’s benefit.
The United States, which owns about $5 billion in Russian central bank assets, is pressuring other G7 countries to go further and seize assets themselves.
But Italy is one of several EU member states, including Germany and France, to be skeptical of such a move and concerned about the implications of seizing assets belonging to a sovereign state, which has immunity under international law. I’m warning you. Some people have expressed skepticism about touching only on profits generated from stalled assets.
The European Central Bank, where Mr. Panetta was a senior official before taking over as head of Italy’s central bank late last year, also said the risks of such a move for euro stability, especially if Europe acts alone rather than as part of the European Union. warns about. International efforts. There are growing concerns that other central banks and governments will also withdraw from euro assets over fears their holdings could be frozen or seized.
Mr. Panetta said that by having an international reserve currency, euro area countries will be able to issue government bonds more cheaply, and the savings effect will be about 0.5 percentage points in interest rates and about 0.5% of gross domestic product (GDP). It is estimated that this is equivalent to .
He reiterated an earlier call for the EU to create a “stable and predictable supply of ‘safe assets'” by creating a permanent program of central debt issuance. The EU’s €800 billion recovery fund launched in the wake of the pandemic was a “welcome first step” but was a one-off program set to expire in a few years, making it “a game-changer”. It wasn’t,” he said.
He said there was “little evidence so far” that rising geopolitical tensions were causing fragmentation in the use of international currencies, but that “politics could have a significant impact on international currencies in the coming years.” We need to pay attention to this,” he warned.