June 8, 2018 / 5:32 PM / a year ago

Breakingviews - Exclusive: “Quitaly clause” marks new risk level

European Council President Donald Tusk and Italian prime minister Giuseppe Conte (R) meet at the start of the G7 Summit in the Charlevoix city of La Malbaie, Quebec, Canada, June 8, 2018. REUTERS/Yves Herman

MILAN (Reuters Breakingviews) - Italy’s new government says it’s not quitting the euro. Prime Minister Giuseppe Conte, speaking to the parliament that gave him the nod earlier this week, said his administration had no plans to leave the single currency: “We have to reiterate it, leaving the euro has never been considered and it is not being considered.” Not everyone is taking Conte at his word.

In what may be a legal first in Italy, lawyers representing international investors added language to a share-purchase deal of an Italian company to guard against the possibility that the country might voluntarily kick off the process of leaving the single European currency, according to an adviser representing the company selling stock.

Though a deal on the undisclosed transaction was initially struck weeks after the right-wing League and radical 5-Star Movement cleaned up in parliamentary elections, lawyers representing the buyers, who are based outside of Italy, added a so-called “Quitaly clause” before sending it back this week to their Italian counterparts.

According to a screenshot of the document seen by Reuters Breakingviews, the buyer’s legal advisers wrote that a “‘Quitaly Event’ means the official initiation of proceedings leading to the Italian Republic leaving the European Union or withdrawing from the Eurozone and exiting the euro, either voluntarily or by means of expulsion.”

The clause is designed to allow the buyer to potentially walk away from the purchase if that happens before the deal receives all the necessary regulatory approvals. While the Italian seller’s counsel said there were discussions about including such language in 2012, amid market worries about Italy’s finances, the idea that Italy would initiate an exit is new. Whether the clause would be legally binding is debatable. And the seller could argue to keep it out of the final contract.

But it captures the heightened risk that Italy’s new government has instilled in global capital markets. The ruling coalition’s original pick for economy minister, eurosceptic economist Paolo Savona, was vetoed by the head of state because of his views on the euro. He was replaced by a figure deemed more reassuring for financial markets. So much for reassurance.


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