Italy's Coronavirus Economic Stimulus Package

The Italian government has approved a long-delayed, €55 billion stimulus package aimed at helping revive an Italian economy ravaged by the coronavirus and help give struggling families a leg up.

Posted vendredi, juin 5 2020
Italy's Coronavirus Economic Stimulus Package

Rome has forecast that the economy will contract by at least 8% this year as a result of the Covid-19 pandemic, which has so far killed over 34,000 people in Italy - the fourth-highest death in the world after the United States, Britain and Brazil. “We have worked on this decree aware that the country is in great difficulty,” said Prime Minister Giuseppe Conte. The stimulus package, which follows an initial €25 billion package introduced in March, includes a mix of grants and tax breaks to help firms ride out the downturn. It also offers help to families, including subsidies for childcare and incentives to boost the ravaged tourism sector.

The key measures

The new decree temporarily freezes corporate tax for all companies with an annual turnover below €250 million and grants non-repayable aid of up to €40,000 to small businesses.

The package also allows the government to intervene and recapitalize struggling companies in line with new EU state aid rules on allowing public capital injections.

"The tools that we are introducing have been defined by the new European framework and are being adopted in all countries," said Finance Minister Roberto Gualtieri, adding that Italy was among the first countries to make use of the new EU rules.

The government also earmarked €25.6 billion to extend existing unemployment benefits, more than €3 billion for the health care system, €1.4 billion for universities and research, and more than €1 billion for the agricultural sector.

The decree also introduces a so-called "emergency income" of up to €800 for low-income families.

Minister Gualtieri also announced €2 billion in aid to help businesses which will have to adapt their activities to meet new social distancing requirements, particularly in the tourism sector.

Italy will also grant residence permits to migrants working in the agriculture and housekeeping sectors.

“We did an incredible job," says the premier. "We have approved an impressive decree that supports businesses, workers and the health care system, but also lays the foundations for the future, for a new start.”

The political contrasts and the difficulties of finding this mountain of resources, which represent two financial manoeuvres in one, took many weeks of work. And the prime minister explained that he had the clear feeling that every hour that passed would weigh on companies and workers. For Conte, the government worked with in the awareness of the difficulties in which the country finds itself in mind.

The Italian green deal

The stimulus package is an emergency measure, of a different nature will be the investments that the government will have to implement if the recovery fund is approved by the European Council.

Italy would receive €81.8 billion in grants and €90.9 billion in loans at very low rates. To access these funds, a National Reform and Public Investment Plan will have to be presented by next October. This is a great opportunity to define an organic framework for the measures to relaunch the country, to overcome the - perhaps inevitable in the first phase - emergency and fragmented nature of the measures adopted so far.

The commission proposal foresees that the use of grants and loans from the recovery fund should be aimed at pursuing the green deal as a strategy for Europe's economic growth, capable not only of addressing the emergency, but also of ensuring a future for the next generation.

The resources of the recovery fund should be used to implement a number of challenging measures which are briefly listed in the commission’s communication. The first measures mentioned are those for the achievement of more ambitious targets for the reduction of greenhouse gases by 2030 that require significant investments in energy transition, energy efficiency and savings, development of renewables, hydrogen and carbon capture and sequestration technologies.

Important and strategic changes are also required in urban mobility systems, particularly with new forms of sharing, and in vehicles, towards low impact vehicles and electrification. These strategies should also be rooted locally, in cities, by investing in new urban regeneration projects that include not only traditional regeneration of buildings and brownfield sites, but also climate mitigation and adaptation measures and an enhancement of green infrastructure.

The European recovery fund is an unmissable opportunity that Italy should not waste to activate a deep process of structural modernization of the country's economy.