VERDUNO, CUNEO, ITALY – 2020/03/31: Medical workers wearing Personal Protective Equipment (PPE) are pictured outside Verduno hospital (Alba-Bra hospital).
The Italian government is ramping up spending plans “significantly” to mitigate the economic impact of the coronavirus, the country’s finance chief said, with the country’s death toll now surpassing 12,000.
Italy is the worst-hit country in Europe. The number of total infections has reached 105,792 with deaths at 12,428, according to data from Johns Hopkins University. The southern European nation has been in lockdown since early March, meaning that most of its economic activity has stopped. People are only allowed outside of their house to buy food and medicine and there is no concrete date yet of when they will be allowed out. The Italian health minister said Wednesday that the lockdown measures will be extended until April 13.
Italy put forward a 25 billion euro ($27.35 billion) fiscal package last month to support businesses. However, Roberto Gualtieri, the Italian economy and finance minister, told the newspaper Il Fatto Quotidiano Wednesday that there will be new fiscal measures “significantly larger” than those originally announced.
The idea, according to Gualtieri, is to support households and Italian companies for the entire duration of the pandemic.
We are not writing a page in an economics manual, we are writing a page in a history book.
Italy’s prime minister
However, any additional spending is challenging given Rome’s exceptionally high government debt. The country’s debt pile is the second largest in Europe, after Greece, which had three bailout programs over the last decade or so.
This is one of the reasons why the Italian government has asked European nations to help.
“We are not writing a page in an economics manual, we are writing a page in a history book,” Italian Prime Minister Giuseppe Conte said Tuesday on a German TV channel.
Conte addressed the German public directly, given Berlin’s opposition to so-called corona bonds. Italy, and eight other EU nations, want to develop a mechanism to issue joint European debt. These fixed income instruments would be used to finance some of the costs from the crisis.
However, Germany, the Netherlands and a few other countries oppose the idea. They believe that combining their debt with other nations, which are much more indebted, would put their economies at greater risk and spark public criticism.
“If the reaction is not cohesive, vigorous, coordinated, Europe will become less and less competitive in the global market space,” Conte said in his TV address, according to the newspaper Il Messagero.
The ongoing divide within Europe is not new. However, the coronavirus crisis is resurfacing an old and challenging debate among the 27 EU member states. A phone conversation between the 27 heads of state last week ended with no meaningful decision.
Speaking to CNBC Wednesday, Valerio De Molli, chief executive officer at The European House – Ambrosetti, said “the real exit door (to the current crisis in Italy) is European solidarity.”
“If our system collapses, eventually Germany will also collapse,” he warned, arguing that a lot of the manufacturing of car parts and other products happens in Italy. Without this production, the global chain will be impacted.
The European Central Bank has announced a massive stimulus program totaling 750 billion euros ($820 billion) of bond purchases until the end of the year. The European Commission, the executive arm of the EU, is also preparing a 37 billion euro ($40.5 billion) package to support businesses across the 27 nations.