Italy is reassessing how it plans to handle billions of Euros' worth of loans guaranteed during the Covid and energy crises should borrowers face difficulties. 

Sources stated Prime Minister Giorgia Meloni's administration had suspended an initiative aimed at dealing with these guarantees, which neared 9% of GDP at the end of last year. 

The so-called 'GLAM' (Guaranteed Loan Active Management) scheme was focused on bad loan manager AMCO, Reuters news agency reports, designed to prevent banks from tapping the guarantees. 

The project was initiated under the prior government of Prime Minister Mario Draghi. Yet now, Meloni's government is contemplating whether to maintain Italian banker Marina Natale at the forefront of AMCO or replace her with someone closer to the government. 

As it stands, AMCO now manages €36.4 billion of impaired credits, with a 4.7% recovery rate within its portfolio last year. 

However, according to sources, the review of the GLAM initiative is not just linked to whether Natale remains in her role but how the new government tackles the situation, which could have major implications for the country's public coffers. 

Current legislation permits banks to tap the guarantee in full and shift the loan onto the state should a borrower default on a payment. 

GLAM focused on helping SMEs, in particular those that borrowed with state guarantees, the Reuters report adds. 

Last August, Italy reached an agreement with EU authorities regarding the terms of GLAM, stating the scheme could initially apply to €12 billion in loans. 

Banks would move SMEs' debts to another vehicle within the programme, leaving recovery efforts to AMCO and partners. 

GLAM was due to be launched between the end of 2022 and the start of 2023, but the country's Economy Minister Giancarlo Giorgetti has not signed two decrees required to explain how the scheme would function. 

The Treasury initially wants to test GLAM's potential and likely consequences before the launch, sources stated.