Reuters sums it up in an all-too-short report:
The Financial Times and Italian daily La Repubblica quoted a report by the treasury detailing the country’s debt transactions and exposure in the first half of 2012, including the restructuring of eight derivatives contracts with foreign banks with a total notional value of 31.7 billion euros.
The derivative contracts date from when Italy magically reduced its deficit from 7.7% in 1995 to 2.8% in 1998. Its Treasury faces a potential loss of about €8bn according to the experts consulted by the Financial Times. The precise details are scant, so we can’t say if Italy cooked its books to secure Eurozone entry. In the meanwhile, there’s this embarrassing tidbit:
An ECB spokesman declined to comment on the bank’s knowledge of Italy’s potential exposure to derivatives losses or on Mr Draghi’s role in approving derivatives contracts in the 1990s before he joined Goldman Sachs International in 2002.
In case you’re wondering, a separate report suggests that Italy might need cash within six months.