Italy Struggles to Contain Virus With Rich North in Lockdown

(Bloomberg) --

Italy’s economic engine ground nearly to a halt on Monday amid Europe’s largest coronavirus outbreak.

Milan, the country’s financial hub, and the productive regions of Lombardy and Veneto were in virtual lockdown. Schools, universities and museums closed, sporting events were canceled and a curfew was imposed on bars, threatening to tip the country’s already weak economy into a recession.

Read More: Italian Markets Suffer Turmoil as Virus Fuels Fear of Recession

Shares on Milan’s stock market suffered their largest intraday decline since June 2016, while the yield on 10-year bonds jumped as the government tried to contain the disease’s worst outbreak in Europe.

There were 219 cases of coronavirus confirmed, Angelo Borrelli, who coordinates the response to the emergency, said at a news conference in Rome Monday. As many as six have died from the illness so far, with all confirmed deaths being people of advanced age and mostly suffering from previous conditions.

Italy Struggles to Contain Virus With Rich North in Lockdown

The increase in infections comes amid intensified screening -- health authorities have conducted tests on more than 3,000 people -- and despite sweeping measures limiting travel to and from affected areas.

The hit to the economy from limiting movement and activity in the prosperous area from Venice to Milan, home to some 15 million people and responsible for almost a third of Italy’s gross domestic product, is likely to be severe.

Adding to the concern: contagion seems to be spreading mostly through hospitals and it remains unclear exactly how the illness arrived in the country.

There were already signs of panic taking hold. Shoppers stormed supermarkets in Milan over the weekend as citizens worried that food stocks would run out. Staples like meat, bread and pasta were in short supply in some stores as consumers, many wearing surgical masks, waited in long lines to stock up.

Quiet Streets

Italy Struggles to Contain Virus With Rich North in Lockdown

Milan’s usually bustling streets were eerily quiet on Monday, with few pedestrians venturing outside and typically crowded cafes mostly empty. Companies including UniCredit SpA, Italy’s biggest bank, encouraged employees to work from home.

Veneto, which encompasses the city of Venice, is “taking precautionary measures -- this is not a pandemic,” regional Governor Luca Zaia said in an interview. “We decided to ban all events for a week especially to protect older citizens, but businesses are working as usual.”

For the 50,000 people in the municipalities south of Milan, where the lion’s share of cases have been identified, measures are even stricter. All work activity has come to a halt with blockades preventing travel in and out of the area.

Unione di Banche Italiane SpA was among lenders saying they were closing branches in affected areas.

Italy Struggles to Contain Virus With Rich North in Lockdown

Analysts at Mediobanca SpA said the virus’s spread could affect Italy’s recovery. “If it is not resolved quickly, it is likely to have a burden on economic activity,” the investment bank said.

Matteo Salvini, leader of the opposition League party, used the outbreak to attack Prime Minister Giuseppe Conte. Italy needs “to make our borders armor-plated,” he said, calling on Conte to resign “if he isn’t able to defend Italy and Italians.”

Bad Moment

The rise in infections comes at a bad moment for Conte’s administration, already under fire for failing to mount a coherent response to the spread of the virus. As Conte chairs a series of meetings in Rome to counter the spread of the disease, his plan for tax reforms and investments to restart an ailing economy has stalled.

Neighboring countries are already considering restrictions to travel to contain the contagion. Austria briefly blocked some train circulation from its southern neighbor Sunday and health ministers from nations bordering Italy will meet Tuesday in Rome to coordinate containment efforts.

Most of Italy’s cases were initially linked to a 38-year-old who sought treatment at a hospital in Lombardy on Feb. 18. While there, he infected dozens of patients and staff, who then spread it further afield. Tracking efforts focused on a friend of the man, who had returned from China, but tests proved negative.

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