Italy Set for $60 Billion Stimulus to Battle Coronavirus Economic Hit

(Bloomberg) --

Giuseppe Conte’s government is set to approve a much-delayed 55 billion-euro ($60 billion) stimulus package to help Italians battle the economic hit from the coronavirus crisis, with the focus on liquidity for businesses and aid to families suffering after over two months of a nationwide lockdown.

Tensions in Conte’s coalition of have led to weeks of delays for a spending plan originally dubbed the “April Decree.” The government was initially due to meet on Sunday evening to approve the package. The session is now scheduled for Wednesday at 5 p.m.

Officials say the decree is still subject to change. Key measures include the following, the officials said, asking not to be named discussing confidential deliberations:

• As much as a total 15 billion euros to help companies pay for worker furloughs
• 6 billion euros of non-reimbursable funds for small companies
• A suspension of regional production tax Irap for companies with sales up to 250 million euros
• 1.6 billion euros to 2 billion euros in help to businesses for paying rent and bills
• About 3 billion euros for healthcare-related measures
• 4.5 billion euros for self-employed and seasonal workers
• An emergency income for workers trapped in the underground economy

With the euro-area’s third-biggest economy laboring under two months of containment measures to counter the spread of the virus, coalition allies and regional leaders -- especially in the hardest-hit North -- are pressing Conte to pick up the pace in easing the lockdown.

The oversubscription rate for a sale of three-year Italian notes on Wednesday slipped, but better demand was registered for an offering of seven-, 15- and 20-year notes and the Treasury sold nine billion euros ($9.7 billion), achieving its target. The yield on 10-year bonds fell, more than erasing all their losses for the week following the outcome of the sale.

Italy’s economy will shrink 9.5% this year, the European Commission said last week. The government estimates output will fall 8%, while Bloomberg Economics sees a 13% contraction.

The government will also earmark resources worth 3 billion euros to capitalize a planned state-controlled company to run failed carrier Alitalia, Transportation Minister Paola De Micheli said Monday.

Clashes over a plan to grant temporary status to illegal immigrants, especially in the agricultural sector, and efforts to find resources to cover some proposed measures have led to delays in approval of the package. Conte has been trying to mediate between the parties in his government, including the anti-establishment Five Star Movement -- the coalition’s largest force -- and the small Italy Alive party of ex-premier Matteo Renzi.

The government approved an initial 25 billion-euro stimulus package in March, but has since been met by protests from businesses that say the promised state-backed loans and liquidity have been delayed by bureaucracy.

Italy, the original European epicenter of the virus, was already headed for a recession before the crisis, with the economy shrinking 4.7% in the first quarter, the biggest drop since the series started in 1995. The country’s massive debt will swell beyond 150% of gross domestic product.

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