In response to the recent ongoing coronavirus pandemic, Italy approved an emergency fund of 400 billion euros in liquidity and loans to assist businesses during the current global crises. This is in addition to an earlier amount of €750 billion worth of credit approved in March. The Prime Minister mentioned this unprecedented economic measure was a first for Italy.
Italy Loan Guarantee Scheme
After the country experienced one of the highest death tolls in Europe, Conte assured citizens to make a further financial package available for businesses and people in financial distress due to lockdown regulations. The Italian loan guarantee scheme includes a 90% loan shield by the government to assist companies with loans and prevents banks from incurring losses. With a possibility of 100% guarantee for loans exceeding €25,000. Furthermore, the Italian government and its export agency announced an injection of an additional €200 billion to the economy.
According to experts the imposed Lockdown restrictions are likely to have a devastating impact on the country’s economy, causing the worst recession in modern history. Business lobby Confindustria expects a 6% decline in national output.
Italian treasury announced that as of April, almost 3.1 billion euros in funds had already been released. Of that, 115 million euros was in the form of loans of up to 25,000 euros.
Financial Assistance from the EU
As a member of the EU, Italy gets to enjoy the benefits of the larger commissioning body in Europe. The EU’s solidarity was put to the test during this global pandemic; alas, they proved to work in unity in combating the economic effects of the coronavirus pandemic. The European Commission announced a plan to borrow on the market and distribute an amount of 750 billion euro in loans and grants across all member states. This financial package hopes to boost economic activity in the EU and prevent a devastating decline of the euro. The commission announced that a bulk of the funds would go to the most affected areas by the pandemic. This includes Italy and Spain with an amount totalling 313 billion euros in loans and grants.
Italy is heavily reliant on tourism, and with the implementation of lockdown and travel warnings, the country expects to experience a challenging time in restarting its economy. Also, the country is one of a few states with high debt. In terms of loan and grant repayments, EU member states could see a higher contribution towards the EU budget with a possibility of new or increased taxes
Italian companies applying for the scheme are advised against approving dividend payments for the current year. The European Commission has made it possible for member states to provide financial aid of this magnitude to struggling companies within their territory. This model aims to keep credit flowing without causing a loss on banks due to additional risk.
Like with many other economies across the globe, the Italian stimulus package comprises of several layers which go beyond government loans and grants. To learn about different measures in places visit Coronavirus Tax Relief Measures in Italy