By Giuseppe Fonte
ROMA, April 6 (Reuters) – Italian government approved on Monday a new emergency decision it will offer more than 400 billion euros ($ 432 billion) worth of liquidity and bank loans for companies affected by coronavirus crisis.
The law, combined with the previous stimulus package inaugurated March, will allow banks to offer total credit more than 750 billion euros to try to prevent the collapse of the eurozone’s third largest economy.
“This is really a weapon. I do not remember such strong actions introduced in the history of our republic to help finance our business,” Prime Minister Giuseppe Conte said at the end of a cabinet meeting.
He promised a further package later this month to help the people most hurt financially by the epidemic.
More than 16,500 people have died from coronavirus in Italy since then the crisis begins Februaryuary, the highest victim of any country. Rome has closed all businesses deemed unimportant for the supply chain until at least April 13.
That The Treasury will protect banks from losses on 90% of loans to companies of all sizes, in a move that is expected to inject around 200 billion euros into the economy. The guarantee can be extended up to 100% of the possible losses for the loan not exceeding € 25,000.
Italian state lender Cassa Depositi e Prestiti (CDP) and its export agent Sace will provide further guarantees until the end of this year for an additional 200 billion euros, according to the decision.
Italian companies that use the scheme must refrain from approving dividend payments for one year.
This scheme, made possible by the loosening of EU rules on state aid to companies, aims to keep credit flowing to the economy without imposing losses on banks because of the additional risk they take due to viruses.
“The Italian banking sector in general is very healthy when the coronavirus crisis hit and it is important to maintain that strength,” said Elena Carletti, professor of finance at Milan’s Bocconi University.
Lockdown restrictions imposed to fight infection are thought to have pushed the Italian economy into the worst recession in modern history. The Confindustria business lobby said last week it expected a 6% decline in national output this year.
Conte said he hoped the sidewalks could be phased out after Easter, but gave no details.
“We want to implement steps that will enable our country to restart vigorously, correct mistakes and react in the best possible way,” he said.
The liquidity package requires the Ministry of Finance to allocate around 30 billion euros above the 25 billion budgeted last month.
Additional expenditure means Italy’s 2020 budget deficit is likely to rise above 4% of gross domestic product (GDP), far exceeding the 2.2% target set in September and 1.6% reported in 2019, which is the lowest in 12 year.
Rome also expanded its special power to protect key industries from foreign predators, including European groups.
“We will be able to control company operations and hostile takeovers not only in the traditional sector but also in finance, credit, insurance, energy, transportation, water, health, food security, robots, semiconductors and cybersecurity,” Conte told reporters.
($ 1 = 0.9262 euros)
(Additional reporting by Valentina Za in Milan, editing by Gavin Jones, Crispian Balmer and Sonya Hepinstall)
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