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August 12, 2020

Europe

ITALY: Wasting time (and money)

BY Wolfango Piccoli

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( 4 mins)
  • The number of daily Covid-19 cases has hovered between 200-300 for weeks, but over the past seven days, the average rose to 400 cases per day.
  • In the immediate term, the main risk appears to be related to “imported cases” from neighboring countries, with the reopening of schools in September being the next big test.
  • Government policy is still primarily focused on emergency measures, while a plan to put the country’s economy back on track is nowhere to be seen.

After becoming the first European country to be hit hard by Covid-19 in March, Italy has registered only 7.5 new cases per 100K inhabitants over the past 14 days. That compares with 17 in the UK, 13 in Germany, 29 in France, and 90 in Spain, according to EU data released on 11 August. However, infections detected have risen over the past few weeks, and hotspots continue to emerge across the country – even if, in most instances, the numbers of people involved are relatively small. The number of daily cases in Italy has hovered between 200-300 for weeks, but over the past seven days, the average rose to 400 cases per day.

While the likely next big test will be the schools’ reopening in September, the immediate concern is about imported cases, as most of the outbreaks have been caused by foreign nationals coming into Italy and Italian holidaymakers returning home. Some regions (including Puglia, Campania, and Emilia-Romagna) have unilaterally begun to order new periods of quarantine (or a swab test within 24 hours from arrival) for people returning from higher-risk European countries such as Spain, Malta, and Greece in a bid to stem the latest outbreaks of coronavirus.

Meanwhile, the national government is considering whether to reissue more stringent restrictions ahead of the autumn, such as making the wearing of masks mandatory while outdoor and limiting access to public spaces. Recall that in late July, the government extended the country’s state of emergency until 15 October. The state of emergency, declared in late January and initially scheduled to last for six months, allows the government to draw up decrees on virus lockdowns and safety rules among other measures without the need for parliamentary approval.

On the economic front, there is still no sign of any government’s plan to put the country back on track. The fractious ruling coalition is neither interested nor in the position to deliver any meaningful structural reform. The Five Star Movement (M5S), the Democratic Party (PD) and their junior coalition partners struggle to agree even on how to spend public money. There are, however, two strong areas of convergence between the ruling parties: a stronger role of the state in the economy and clientelistic policies aimed at boosting their popular support. In this regard, the money (Italy is expected to receive EUR 81.4bn in grants and EUR 127.4bn in loans) provided by the EU recovery fund will offer an unprecedented opportunity for the ruling parties to make further inroads on both these fronts.

August decree, another missed opportunity

As indicated by the recently approved “August decree,” the government’s approach is still focused on short-term emergency initiatives rather than on measures that could boost the economic outlook in the medium-long term.The new stimulus package worth EUR 25bn that was approved on 7 August set aside roughly half of that sum to support employment. Under the new decree, companies will not be allowed to lay off employees as long as they are benefiting from the coronavirus-related wage-support scheme, which will run for another 18 weeks or — if used intermittently — until the end of the year. Alternatively, companies that restart activities and forego state support will benefit from four months of fiscal breaks. The layoff ban was originally due to expire on 17 August.

The decree also extended until January a moratorium on repayments for loans to small and medium-sized businesses, and funds a four-month cut in pension contributions paid by companies on behalf of new permanent hires. Companies based in the poorest regions in the South will benefit from a 30% cut in pension contributions for all workers, not just new hires.

Among other provisions, the package included extra funding for public schools reopening in September under new safety rules. The one-off EUR 400-800 “emergency income” introduced in March for supporting low-income households was also renewed until 15 October. Finally, the decree allows tax payments that were suspended during the country’s lockdown to be repaid by the end of 2022 rather than by year’s end. In total, the three emergency decrees approved by the government since March released funding to the tune of EUR 100bn.

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