Italy Aid Money Finally Starting to Trickle Down to Economy
(Bloomberg) -- More than seven weeks after Italy imposed one of Europe’s most rigorous lockdowns, money is finally trickling down to companies hurt by the ensuing economic paralysis.
The aid is starting to arrive just as Prime Minister Giuseppe Conte announced the easing of some of the curbs from May 4. But the delay in getting money to companies and households risks compounding the impact on an economy that was already weak before the pandemic.
On Monday, lender UniCredit SpA announced that Pastificio Di Martino, a storied pasta factory near Naples founded in 1912, will receive a 10 million-euro ($10.8 million) loan to absorb the shock of the coronavirus and keep the business afloat. The loan is backed by Sace, Italy’s export credit agency, and is part of a package of credit guarantees set up in April that are one of the key planks of the government’s stimulus plan.
“Money is finally flowing to firms, but the processes are too slow and complicated,” said Massimiliano Romano, head of research at Concentric Italy. “While large companies are structured enough to face liquidity shortages, this could be a big problem for small firms.”
While most of Italy’s wide range of relief measures were approved in mid-March, procedures to accept and process requests for aid have mainly been set up this month.
Since then, banks and public authorities have been flooded with requests for various types of aid, from babysitting vouchers to checks for freelancers and professionals who have been idled by the lockdown. Here’s a rundown of aid applications, according to reports by the Bank of Italy and pension agency Inps:
- 1.3 million requests to suspend loan and mortgage payments, worth about 140 billion euros, had been received as of April 17
- 22,480 requests for state-backed loans by small and medium-sized companies, worth about 3.1 billion euros, also as of April 17
- Unemployment benefits for 6.1 million workers
- 66,000 babysitter vouchers
- 4.4 million people asked for the 600-euro check for freelancers and professionals between April 1-20
- About 3.2 million of those have been accepted, with 1.9 billion euros paid out April 17-23
Very small businesses, such as restaurants and most shops that had to close down in early March and won’t be allowed to reopen until mid-May or later, can ask for a 25,000-euro loan that is entirely backed by the state. Intesa Sanpaolo SpA, Italy’s largest bank by market capitalization, reported Friday that it had received 104,000 of those demands, of which it had managed to approve only 1,000.
Some banks are wary of speeding up the approval process, despite the state guarantee, because of the risk of legal repercussions, Bank of Italy’s head of structural economic analysis, Fabrizio Balassone, told lawmakers on Monday.
“The issue requires finding the balance between two opposing priorities,” Balassone said. “Speeding up the flow of resources to companies that need them, and protecting the state, avoiding that the guarantees back loans with a very high risk of not being repaid.”
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