ROME - Italy's government approved on
Monday a new emergency decree that will offer more than 400
billion euros ($432 billion) worth of liquidity and bank loans
to companies hit by the coronavirus crisis.
The legislation, combined with a previous stimulus package
unveiled in March, would allow banks to offer credit totalling
more than €750 billion to try to stave off the collapse of
the euro zone's third largest economy.
"This is real firepower. I cannot remember such powerful
measures being introduced in the history of our republic to help
with the financing of our businesses," Prime Minister Giuseppe
Conte said at the end of a cabinet meeting.
He promised a further package later this month to help the
people most financially hurt by the epidemic.
More than 16,500 people have died of coronavirus in Italy
since the crisis started in February, the highest toll of any
country. Rome has shuttered all businesses not deemed essential
to the supply chain until at least April 13.
The Treasury will shield banks from losses on 90% of loans
to companies of all sizes, in a move expected to inject some €200
billion into the economy. The guarantee can be extended to
100% of possible losses for loans not exceeding €25,000.
Italy's state lender Cassa Depositi e Prestiti (CDP) and its
export agency Sace will provide further guarantees until the end
of this year for an additional €200 billion, according to
the decree.
Italian companies using the scheme must refrain from
approving dividend payments for a year.
The scheme, made possible by a loosening of European Union
rules on state aid to companies, aims to keep credit flowing to
the economy without forcing losses onto banks because of the
additional risks they take on due to the virus.
"The Italian banking sector was generally in very good
health when the coronavirus crisis struck and it is important to
preserve that strength," said Elena Carletti, finance professor
at Milan's Bocconi University.
GOLDEN POWERS
Lockdown restrictions imposed to fight the infection are
expected to have pushed Italy's economy into its worst recession
in modern history. Business lobby Confindustria said last week
it was forecasting a 6% decline in national output this year.
Conte said he hoped the curbs could begin to be removed
after Easter, but gave no details.
"We want to put in place measures that will enable our
country to start up again vigorously, make up lost ground and
react in the best possible way," he said.
The liquidity package requires the Treasury to earmark
around 30 billion euros on top of the previous 25 billion
budgeted last month.
The extra spending means Italy's 2020 budget deficit will
likely climb above 4% of gross domestic product (GDP), far
beyond the 2.2% target set in September and the 1.6% reported in
2019, which was the lowest in 12 years.
Rome also extended the special powers it had to protect key
industries from foreign predators, including European groups.
"We will be able to control corporate operations and hostile
takeovers not only in traditional sectors but also in the
financial, credit, insurance, energy, transport, water, health,
food safety, robotics, semiconductors and cybersecurity," Conte
told reporters.