Italy Sees No Critical Budget Issue, Cash in Line With Forecast

Italy doesn’t see any “critical issue” for the country’s budget as its cash availability is developing in line with forecasts.

The Italian Treasury said in a statement late Friday that it expects to have more than 80 billion euros ($93 billion) in cash at the end of July, near 2019 levels, amid the coronavirus emergency which forced the country to delay some fiscal payments.

As the first European economy crippled by the pandemic, Italy is under pressure to increase spending to ignite a recovery. While activity has started to rebound since the government relaxed a lockdown, there are concerns the coming months will bring more pain when aid measures expire, including a ban on firing workers and the suspension of tax and loan payments.

The finance ministry sees “encouraging signs” that economic activity is revamping in July. The first data on value-added tax collection for July show a decline of 4.7% versus 2019, which is a much smaller drop than in the previous three months, it said.

The statement is a response to speculation in local media that Finance Minister Roberto Gualtieri was pushing the government to use the European Stability Mechanism credit lines to avoid any risks to the country’s budget. Health Minister Roberto Speranza said Italy should consider using the ESM to get 20 billion euros in funds that are urgently needed for its health system, according to an interview with daily La Stampa on Saturday.

The government approved a proposal for 25 billion euros in extra spending earlier this week, with the extra money allocated to help businesses with temporary layoffs and liquidity as well as to provide subsidies to local and regional authorities.

©2020 Bloomberg L.P.

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