8th step – Monetary sovereignty belongs to the state

Italy_ Monetary sovereignty

Italy_ Monetary sovereignty

To affirm today that monetary sovereignty in the Eurozone belongs to the States is a revolutionary idea and not shared by all, not even among the so-called "sovereignists".

For some it is a problem of ignorance, in the sense that they ignore it, because the subject is complex and interdisciplinary, so it is not enough to deepen it from an economic and monetary point of view, but also historical, financial and above all legal skills.

For others it is a psychological problem, because they have studied so much and on the wrong books, which are struggling to abandon the idea that the state has given up its monetary sovereignty, as the mainstream tells us.

Then there are those in bad faith, because they try in every way to convince you that monetary sovereignty has been ceded, so that you do not even try to bring the problem of being able to use it, with the result that they continue to use it surreptitiously. private bankers who have been doing it for centuries.

The banking and financial power has always tried to confuse the waters on monetary sovereignty, doing everything possible so that the State and its citizens do not deal with it, so that it is always and only "within their competence".

To succeed in their aim, they deliberately blurred the boundary between "monetary sovereignty", understood as the power of a state to create money, and "monetary policies", that is, the set of decisions and instruments that the central bank can adopt to orient and modify the quantity and cost of money in the economic system.

Monetary sovereignty, like all other sovereignties, is one of the essential elements of a state, together with the people and the territory, therefore it cannot be ceded otherwise the state simply becomes a colony subject to the power of someone else, be it financial, banking or European.

Sovereignty belongs to the people ”, our Constitution states in article 1, and for article 11 it cannot be sold, but only limited with certain conditions and reasons.

Monetary policies, on the other hand, concern the activities of a Central Bank, which with the Lira were the exclusive competence of the Bank of Italy while today they have been transferred to the ECB, but cannot concern the monetary sovereignty that has always remained with the Ministry of the Treasury. , and then to the state.

Monetary, fiscal and seigniorage sovereignty

Historically, monetary sovereignty has always belonged to the "sovereign" or to the state, because it is directly connected with the power to impose taxes and decide with which currency they must be paid.

Linked to monetary sovereignty is the right to receive seigniorage on the monetary issue, which can be equal to one of these two values:

– the difference between the nominal value of the currency and the costs incurred to create it, in the event that the created currency is spent in the economic system;

– any income derives as a consequence of the monetary issue, in the event that the created money is lent to the economic system or used to purchase assets that generate returns.

Seigniorage on metal coins is perceived by the State directly following the minting and use of that currency as public expenditure, while seigniorage on banknotes " is perceived in the first instance by central banks, which however then transfer it to the States, holders last of monetary sovereignty "(statement by the Bank of Italy on the page dedicated to seigniorage https://www.bancaditalia.it/compiti/emissione-euro/signoraggio/index.html ).

In the previous article we clearly explained all the reasons why monetary sovereignty belongs to the state and cannot be otherwise, since fiscal sovereignty is also its exclusive competence.

As Aristotle argued more than 2000 years ago, money was born " by convention, as a means of exchange to satisfy the need " and " does not exist by nature but by name ", that is, by law, " and for this reason it has the name of nomisma ".

The State is therefore the only subject in the world that in a given territory can create instruments of exchange by imposing their acceptance on the population, because it is the only one who can give value to money by declaring to accept it for the payment of taxes.

In the conclusions of the previous article, which illustrated the 7th step, we asked ourselves the following question:

how can the Italian state use monetary sovereignty to solve the problems of the economic crisis?

Euro coins

The only monetary instrument in euro that the European Treaties assign as the exclusive competence of the ECB and the National Central Banks is the banknote, which according to art. 128 paragraph 1 of the TFEU " constitute the only banknotes having legal tender in the Union ".

As regards metal coins, paragraph 2 of the same article intervenes, which states “ Member States may mint euro coins with the approval of the European Central Bank as regards the volume of minting ”.

In particular, national states can mint collector coins with a value of more than 2 euros, which in Italy have the inscription "Italian Republic" because they are valid as legal tender only within our national borders.

Considering that the ECB has always approved without problems the minting volumes for the metallic coins requested by the States and that Italy is among the nations that requested smaller quantities, we can certainly request additional quantities compared to the past up to the other states.

In particular, Italy has requested a total minting volume of around 8 billion euros while Germany has reached around 20 billion euros, so it can be safely assumed that an additional quantity of up to 10 billion euros will be requested. Approach approved to the Germans.

State notes in euros

State notes are a different legal case from banknotes, when we had the Lira they were considered "legal tender" and issued directly by the Treasury, without any need for authorization from the Bank of Italy.

Considering that today we have transferred to the ECB the functions that in the Lira were the exclusive competence of the Bank of Italy but certainly not those of the Treasury Ministry, today we can say that a possible issue of state notes could be carried out in full compliance with the European treaties.

In fact, there is no article in the European Treaties that expressly prohibits monetary instruments other than metal coins and banknotes, opening up a "legal" possibility of issuing an instrument of this type, which, however, could certainly be challenged from a "political point of view. ".

In playing devil's advocate, there are two arguments that could be used:

  • the state note was historically born as a substitute for high-value metal coins, we recall the 500 lire by Aldo Moro which replaced the 500 lire silver metal coins; therefore they could fall within the minting volume of the coins and therefore have the need for approval by the ECB, which could disagree;
  • if the government notes were declared "legal tender" as were the old 500 lire, this feature could also bring at least the volume of issue within the competence of the ECB.

However, there is a counter-move to these arguments, it is enough to issue "state bills with voluntary acceptance and fiscal value" to defuse all the previous disputes, because it would fall within the fiscal policies.

However, the problem remains that this solution, as well as being limited in its use, is certainly problematic from a strictly "political" point of view, let us remember the opinion of Mario Draghi, when he was still President of the ECB, on the Minibots " Or they are illegal money or are they debt ".

However, the possibility of issuing state notes has been supported for years not only by us, but also by Paolo Maddalena, Vice President emeritus of the Constitutional Court, as can be seen from this article https://monetapositiva.it/moneta-a-debito -and-credit-money / , by Nino Galloni, Francesco Carraro and many other economists and jurists.

Public banking electronic money

In the meantime, let's start from the observation that today we mainly use “private money”, as the use of legal tender currency is limited by a whole series of measures that tend to limit the use of cash in favor of banking electronic money.

I recommend a recent article of mine on this issue which highlights the letters on this issue sent to the Italian Government by the ECB, which reiterates the need not to limit the use of cash too much because they are the only legal tender existing in the Eurozone. . https://scenarieconomici.it/la-bce-bacchetta-il-governo-sui-contanti/

In the current monetary system, bank electronic money constitutes more than 90% of all the money we use, therefore in the field of electronic money we can hypothesize various voluntary acceptance instruments of exchange that can be issued directly by the State.

Private banks issue money through loans, but having private shareholders to account for because they are interested in banking dividends, they tend to favor loans that generate real estate bubbles and financial speculation, because they are more profitable than loans to all. real economy, especially in times of recession like the present one.

In practice, private banks have a tendency to amplify the amplitude of the fluctuations in the economic cycle, because they increase loans in the phases of expansion and reduce them in the phases of recession, just when companies and households would need them most.

In this sense, the public bank could instead perform an anti-cyclical function, that is to increase loans to the real economy precisely in times of difficulty such as the current one, having a public purpose and not a private interest.

Today in Italy practically all the money we use is generated by the private banking system with loans, therefore a public and private debt is automatically generated which involve the payment of interest each year for an amount of about 200 billion euros in total, which weigh on the whole economy and is one of the main causes of continuing economic crises.

If in Italy there were at least 50% of public banks as in Germany, a substantial part of these interest paid by the system would go back to the State which could reinvest it in the real economy, to the benefit of the proper functioning of the economic system.

Public banks can also access Targeted Longer-Term Refinancing Operations (TLTRO) programs, which provide euro area credit institutions with multi-year maturities aimed at improving the functioning of the monetary policy transmission mechanism, supporting the provision of bank credit to the real economy.

Today these ECB loans are disbursed at negative rates, so these operations are quite advantageous both for the state and for businesses and households, which would be the preferred final recipients of this public activity.

At the beginning of the pandemic crisis, Germany guaranteed through its public banks, additional and subsidized loans to the real economy up to a total amount of up to 1000 billion euros, which made it possible to support German companies in a time of difficulty of the economy due to the restrictive measures for Covid-19.

But the public bank also has the function of financing the State, because it can lend money directly to the State or buy its government bonds, practically performing the function of lender of last resort as it was once performed by the Bank of Italy towards of the Treasury or as it is now surreptitiously carried out by the ECB with Quantitative Easing.

In this way there would be a concrete benefit on the part of the State which would pass the returns, that is the interest, on government bonds to its public bank, having been able to count on the money lent by the ECB at even negative rates.

In this way, the State, through its public bank, collects the differential between the interest paid on government bonds and the negative interest received by the ECB, and can reinvest it in the real economy for the benefit of citizens and businesses.


To learn more about the topics we have covered in this article, you can use this video that summarizes them in a simple and clear way:

In the next step we will deal with the chapter of fiscal currencies, which deserves a separate discussion because it is certainly the most innovative tool that the State has available to inject money into the real economy and to be able to finance its economic policies without increasing public debt and therefore in full compliance with the European Treaties.

Because THEY won't give up easily, but WE WILL NEVER give up.

The currency will be owned by the citizens and free from debt.

© Fabio Conditi – President of the Moneta Positiva association


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The article 8th step – Monetary sovereignty belongs to the State comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/8-passo-la-sovranita-monetaria-e-dello-stato/ on Mon, 22 Feb 2021 15:00:49 +0000.