February 24, 2020

ITALY: Government battles covid-19 outbreak

BY Wolfango Piccoli

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( 3 mins)

Italy is battling with the worst Coronavirus (covid-19) outbreak outside Asia, with more than 200 cases reported across five different regions, and five dead. Two major clusters of infection have been identified so far, both in the country’s economic heartland. One is south-east of Milan, around the town of Codogno; the other is south-west of Venice, near Padua. A decree imposing an extended lockdown in these areas (concerning around 50K people affected in 11 towns) was issued on 22 February to try to contain the outbreak. The government did not say how long the quarantine would last.

Other measures adopted to limit the contagion include the closure of schools, universities, and other public spaces in most of northern Italy. School trips, trade shows and sports events have been banned too.

The initial source of the sudden flareup remains unknown. The authorities are struggling to reconstruct how the outbreak started, a key step needed to track down all the people who might be infected without yet showing symptoms. One focus is an emergency room in a hospital in Codogno. According to some experts, this could explain the rapid diffusion of the contagion.

Even faster than the fear of contagion has been the widespread panic-buying over the weekend, even in areas non affected by quarantine measures. Commuter trains arriving in Milan and other cities in the north carried a fraction of the people they normally would on a Monday morning, after authorities called upon people to work from home if possible.

The economic damage could be significant as the outbreak has occurred across the country’s industrial heartlands of Lombardy, Veneto and Emilia-Romagna. The first two regions alone count for around 30% of Italy’s GDP and for around 40% of the country’s exports. Tourism, which represented around 13% of GDP in 2019, will suffer too.

Just the economic cost of the current bans on the holding of cultural events and the closure of schools in the northern regions could amount to around 0.5% of GDP. In addition, the suspension of events in large public and private spaces (such as the Venice carnival) could raise this figure to 0.1% of GDP.

The government is expected to issue a decree shortly with emergency measures to support companies and families affected by the covid-19 outbreak in the country’s northern regions. The temporary suspension of local tax, utilities and mortgage payments are likely to be included in the decree. Small and medium size businesses in affected areas will be given preferential access to a state relief fund (the so-called Fondo di garanzia per le PMI).

On the political front, Matteo Salvini has called for Italy to suspend the Schengen treaty and shut the country’s borders to combat the virus and for the resignation of Prime Minister Giuseppe Conte. Salvini’s opportunistic attacks are unlikely to succeed given the complexity of the crisis that Italy is now facing and the inherent difficulty in attributing responsibilities. Salvini’s offensive could be also undermined by the fact that the regional governments of the two regions badly affected by the contagion – Lombardy and Veneto – are controlled by the Lega. Despite Salvini’s efforts, the covid-19 outbreak should provide the government with some political relief in the short-term.

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