Exhibit 1
Recent Developments update dated January 11, 2005
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, 2002. 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
Italy’s real GDP grew at a seasonally adjusted rate of 1.3 per cent during the twelve months ended September 30, 2004, based on ISTAT data. Italy’s seasonally adjusted average unemployment rate decreased to 8.1 per cent during the second and third quarters of 2004 from 8.5 per cent during the first quarter of 2004. Consumer prices, as measured by the harmonized EU consumer price index, had increased at an annual rate of 2.2 per cent during the twelve months ended November 30, 2004.
The 2005-2008 Program Document
In July 2004 the Government finalized and presented to Parliament its 2005-2008 Program Document, which was updated on September 29, 2004. The following table sets forth information on Italy’s principal public finance targets for the years indicated, as well as the gross domestic product, inflation and unemployment assumptions underlying the Program Document, as revised in accordance with the update to the 2005-2008 Program Document.
2005-2008 PROGRAM DOCUMENT OBJECTIVES
2005 | 2006 | 2007 | 2008 | |||||||||||||
(Target) | ||||||||||||||||
Primary balance, as a percentage of GDP | 2.6 | 3.3 | 4.0 | 4.8 | ||||||||||||
Interest expense, as a percentage of GDP | 5.1 | 5.3 | 5.4 | 5.6 | ||||||||||||
Net borrowing, as a percentage of GDP | (2.7 | ) | (2.0 | ) | (1.4 | ) | (0.9 | ) | ||||||||
Structural net borrowing, as a percentage of GDP | (2.2 | ) | (1.7 | ) | (1.2 | ) | (0.8 | ) | ||||||||
Public debt, as a percentage of GDP | 104.1 | 101.9 | 99.2 | 98.0 | ||||||||||||
GDP (% real growth rate) | 2.1 | 2.2 | 2.3 | 2.3 | ||||||||||||
Inflation (% real growth) | 1.6 | 1.5 | 1.4 | 1.4 | ||||||||||||
Unemployment rate (%) | 7.6 | 7.1 | 6.8 | 6.6 |
Source: 2005-2008 Program Document and Update to the 2005-2008 Program Document. |
Because the Program Document is based on assumptions with respect to future economic developments, including international economic trends, there can be no assurance that its objectives will be attained.
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.
June 30, 2004 | September 30, 2004 | |||||||
(millions of euro) | ||||||||
Short term bonds (BOT) | 144,550 | 144,095 | ||||||
Medium and long term bonds (initially incurred or issued in Italy) | 989,228 | 996,281 | ||||||
External bonds (initially incurred or issued outside Italy) | 92,110 | 89,886 | (1) | |||||
Total debt incurred by the Treasury | 1,225,888 | 1,230,262 | ||||||
Source: Ministry of Economy and Finance | ||
(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 (i) US$989 million of debt originally incurred outside Italy by Ferrovie dello Stato S.p.A., or FS, the State railway entity, and assumed by the Treasury by law in 1996 and (ii) approximately €5,629 million in obligations outstanding at September 30 under Italy’s €10 billion Commercial Paper program, with maturities of less than one year. | ||
The amount of external bonds shown above does not correspond to the total amount of external bonds indicated in the table “External Bonds of the Treasury as of September 30, 2004” below, which does not take into account (i) the effect of currency swaps, (ii) FS debt incurred outside Italy, and (iii) Italy’s Commercial Paper program. |
The following table shows the external bonds of the Treasury issued and outstanding as of September 30, 2004.
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External Bonds of the Treasury
as of September 30, 2004
Initial Public | Original Principal | Principal Amount | ||||||||||||||||||||||||||
Title | Interest Rate(%) | Offering Price | Date of Issue | Maturity Date | Amount | Outstanding | Equivalent in euro | |||||||||||||||||||||
US$(1) | ||||||||||||||||||||||||||||
$3,500,000,000 | 6.875 | % | 98.725 | % | September 27, 1993 | September 27, 2023 | 3,500,000,000 | 3,500,000,000 | 2,820,533,484 | |||||||||||||||||||
$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 | 1,208,800,064 | |||||||||||||||||||
$750,000,000 | 5.81%-6.70 | % | 100.000 | % | March 5, 1996 | Mar 5, 2002/10 | 750,000,000 | 750,000,000 | 604,400,032 | |||||||||||||||||||
$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 | 1,208,800,064 | |||||||||||||||||||
$2,500,000,000 | 6.000 | % | 99.755 | % | May 29, 1998 | May 29, 2008 | 2,500,000,000 | 2,500,000,000 | 2,014,666,774 | |||||||||||||||||||
$2,000,000,000 | 7.250 | % | 99.682 | % | February 7, 2000 | February 7, 2005 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 6.000 | % | 99.274 | % | February 22, 2001 | February 22, 2011 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 5.250 | % | 99.506 | % | April 5, 2001 | April 5, 2006 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$100,000,000 | 5.000 | % | 99.635 | % | May 15, 2001 | May 15, 2005 | 100,000,000 | 100,000,000 | 80,586,671 | |||||||||||||||||||
$3,000,000,000 | 4.375 | % | 99.468 | % | October 25, 2001 | October 25, 2006 | 3,000,000,000 | 3,000,000,000 | 2,417,600,129 | |||||||||||||||||||
$2,000,000,000 | 4.375 | % | 98.007 | % | January 28, 2002 | October 25, 2006 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 5.625 | % | 99.893 | % | March 1, 2002 | June 15, 2012 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 4.625 | % | 99.594 | % | March 22, 2002 | June 15, 2005 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$1,000,000,000 | 5.625 | % | 99.392 | % | May 8, 2002 | June 15, 2012 | 1,000,000,000 | 1,000,000,000 | 805,866,710 | |||||||||||||||||||
$300,000,000 | 3 mth libor - 0.065% | 100.000 | % | August 1, 2002 | August 1, 2007 | 300,000,000 | 300,000,000 | 241,760,013 | ||||||||||||||||||||
$3,000,000,000 | 3.625 | % | 99.721 | % | September 4, 2002 | September 4, 2007 | 3,000,000,000 | 3,000,000,000 | 2,417,600,129 | |||||||||||||||||||
$3,000,000,000 | 2.500 | % | 99.767 | % | January 30, 2003 | March 31, 2006 | 3,000,000,000 | 3,000,000,000 | 2,417,600,129 | |||||||||||||||||||
$2,000,000,000 | 5.375 | % | 98.436 | % | February 27, 2003 | June 15, 2033 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 4.375 | % | 99.694 | % | February 27, 2003 | June 15, 2013 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$1,250,000,000 | 3.250 | % | 99.949 | % | May 6, 2003 | May 6, 2008 | 1,250,000,000 | 1,250,000,000 | 1,007,333,387 | |||||||||||||||||||
$2,000,000,000 | 2.500 | % | 99.521 | % | July 3, 2003 | July 15, 2008 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$3,000,000,000 | 2.750 | % | 99.901 | % | November 13, 2003 | December 15, 2006 | 3,000,000,000 | 3,000,000,000 | 2,417,600,129 | |||||||||||||||||||
$100,000,000 | 4.170 | % | 100.000 | % | November 14, 2003 | November 15, 2010 | 100,000,000 | 100,000,000 | 80,586,671 | |||||||||||||||||||
$100,000,000 | 4.060 | % | 100.000 | % | December 9, 2003 | December 9, 2010 | 100,000,000 | 100,000,000 | 80,586,671 | |||||||||||||||||||
$2,000,000,000 | 2.75 | % | 100.239 | % | January 14, 2004 | December 15, 2006 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 3.25 | % | 99.515 | % | March 3, 2004 | May 15, 2009 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
$2,000,000,000 | 3.75 | % | 99.783 | % | June 30, 2004 | December 14, 2007 | 2,000,000,000 | 2,000,000,000 | 1,611,733,419 | |||||||||||||||||||
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 | ||||||||||||||||||||
€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 | ||||||||||||||||||||
€1,000,000,000 | 5.250 | % | 99.952 | % | March 10, 2000 | March 10, 2005 | 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 |
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Initial Public | Original Principal | Principal Amount | ||||||||||||||||||||||||||
Title | Interest Rate(%) | Offering Price | Date of Issue | Maturity Date | Amount | Outstanding | Equivalent in euro | |||||||||||||||||||||
€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 | ||||||||||||||||||||
3 mth euribor - | ||||||||||||||||||||||||||||
€1,000,000,000 | 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 | 193,249,163 | ||||||||||||||||||||
ChF 1,000,000,000 | 3.500 | % | 102.900 | % | September 25, 1998 | September 25, 2008 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,500,000,000 | 3.125 | % | 99.825 | % | January 15, 1999 | July 15, 2010 | 1,500,000,000 | 1,500,000,000 | 966,245,813 | |||||||||||||||||||
ChF 1,000,000,000 | 3 mth libor – 0.1% | 100.060 | % | March 24, 2000 | March 24, 2005 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | ||||||||||||||||||||
ChF 1,000,000,000 | 3.625 | % | 100.820 | % | January 10, 2001 | January 10, 2006 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,000,000,000 | 3.000 | % | 100.180 | % | February 11, 2002 | August 11, 2006 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,000,000,000 | 2.000 | % | 100.470 | % | January 30, 2003 | April 30, 2009 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,000,000,000 | 1.250 | % | 99.775 | % | August 11, 2003 | February 9, 2007 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,000,000,000 | 1.750 | % | 100.090 | % | February 3, 2004 | March 3, 2008 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
ChF 1,000,000,000 | 2.750 | % | 100.625 | % | July 1, 2004 | July 1, 2011 | 1,000,000,000 | 1,000,000,000 | 644,163,875 | |||||||||||||||||||
Pounds Sterling(4) | ||||||||||||||||||||||||||||
£400,000,000 | 10.500 | % | 100.875 | % | April 28, 1989 | April 28, 2014 | 400,000,000 | 400,000,000 | 582,411,182 | |||||||||||||||||||
£1,500,000,000 | 6.000 | % | 98.565 | % | August 4, 1998 | August 4, 2028 | 1,500,000,000 | 1,500,000,000 | 2,184,041,934 | |||||||||||||||||||
£105,000,000 | 6 mth libor - 0.3% | 99.700 | % | May 2, 2000 | May 2, 2005 | 105,000,000 | 105,000,000 | 152,882,935 | ||||||||||||||||||||
£600,000,000 | 3 mth libor - 0.15% | 100.000 | % | March 5, 2003 | March 5, 2008 | 600,000,000 | 600,000,000 | 873,616,773 | ||||||||||||||||||||
£250,000,000 | 5.25 | % | 99.476 | % | July 29, 2004 | December 7, 2034 | 250,000,000 | 250,000,000 | 364,006,989 | |||||||||||||||||||
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 | 239,779,403 | |||||||||||||||||||
NOK 2,000,000,000 | 4.34 | % | 100.000 | % | June 23, 2003 | June 23, 2015 | 2,000,000,000 | 2,000,000,000 | 239,779,403 | |||||||||||||||||||
Japanese Yen(6) | ||||||||||||||||||||||||||||
¥200,000,000,000 | 5.000 | % | 99.540 | % | December 15, 1994 | December 15, 2004 | 200,000,000,000 | 200,000,000,000 | 1,458,044,762 | |||||||||||||||||||
¥125,000,000,000 | 5.500 | % | 100.000 | % | December 15, 1994 | December 15, 2014 | 125,000,000,000 | 125,000,000,000 | 911,277,976 | |||||||||||||||||||
¥225,000,000,000 | 3.750 | % | 100.000 | % | June 8, 1995 | June 8, 2005 | 225,000,000,000 | 225,000,000,000 | 1,640,300,357 | |||||||||||||||||||
¥125,000,000,000 | 4.500 | % | 100.000 | % | June 8, 1995 | June 8, 2015 | 125,000,000,000 | 125,000,000,000 | 911,277,976 | |||||||||||||||||||
¥150,000,000,000 | 3.800 | % | 100.000 | % | April 4, 1996 | March 27, 2008 | 150,000,000,000 | 150,000,000,000 | 1,093,533,571 | |||||||||||||||||||
¥100,000,000,000 | 3.700 | % | 100.000 | % | November 14, 1996 | November 14, 2016 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
¥100,000,000,000 | 3.450 | % | 99.800 | % | March 24, 1997 | March 24, 2017 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
¥100,000,000,000 | 1.800 | % | 99.882 | % | February 23, 2000 | February 23, 2010 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
¥100,000,000,000 | 0.375 | % | 99.936 | % | October 10, 2001 | October 10, 2006 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
¥100,000,000,000 | 0.375 | % | 99.800 | % | April 2, 2002 | October 10, 2006 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
¥100,000,000,000 | 0.650 | % | 99.995 | % | April 14, 2004 | March 20, 2009 | 100,000,000,000 | 100,000,000,000 | 729,022,381 | |||||||||||||||||||
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 | 580,990,007 | |||||||||||||||||||
TOTAL OUTSTANDING | 80,434,935,389 | (8) | ||||||||||||||||||||||||||
Source: Ministry of Economy and Finance | ||
(1) | U.S. dollar amounts have been converted into euro at $1.2409/€1.00, the exchange rate prevailing at September 30, 2004. | |
(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 ChF1.5524/€1.00, the exchange rate prevailing at September 30, 2004. | |
(4) | Pounds Sterling amounts have been converted into euro at £0.6868/€1.00, the exchange rate prevailing at September 30, 2004. | |
(5) | Norwegian Kroner amounts have been converted into euro at NOK8.341/€1.00, the exchange rate prevailing at September 30, 2004. | |
(6) | Japanese Yen amounts have been converted into euro at ¥137.17/€1.00, the exchange rate prevailing at September 30, 2004. |
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(7) | Australian Dollar amounts have been converted into euro at A$1.7212/€1.00, the exchange rate prevailing at September 30, 2004. | |
(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 September 30, 2004 | ||||||||
Currency | Before Swap | After Swap | ||||||
US Dollars | 48.69 | % | 8.92 | % | ||||
Euro | 24.06 | % | 66.89 | % | ||||
Swiss Francs | 7.85 | % | 8.03 | % | ||||
Pounds Sterling | 5.17 | % | 3.35 | % | ||||
Norwegian Kroner | 0.60 | % | 0.00 | % | ||||
Japanese Yen | 12.92 | % | 12.80 | % | ||||
Australian Dollar | 0.72 | % | 0.00 | % | ||||
Total External Bonds (in millions of Euro) | € | 80,434 | € | 83,459 |
The total amount shown above does not include approximately €5,629 million outstanding under Italy’s Commercial Paper program. |
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