MNI EXCLUSIVE: Italy May Boost Spending By EUR-8-10 Bln

--Spending Boost May Come In Decree Before September

By Silvia Marchetti

     ROME(MNI) - Italy could further raise deficit spending before September by

roughly EUR8-10 billion in additional pandemic stimulus, ruling coalition

sources told MNI.

     The measure could be approved in a decree requiring parliamentary

authorisation, adding to two earlier decrees, for EUR25 billion in March, and

EUR55 billion in May.

     It could support critical sectors such as tourism, the car industry and

struggling workers, but one source noted many areas needed help. Local

authorities could also receive additional financing, and some of the funds could

go towards providing more guarantees for bank loans.

     The spending in the decree, which might be approved before the summer

break, would not be covered by the recent European Commission's approval of an

'umbrella' scheme under state aid rules allowing Italy up to EUR9 billion in

additional support for its economy during the pandemic, said sources with links

to the Democratic Party and the Five-Stars Movement.

     --EU UMBRELLA

     "That umbrella is the maximum state aid flexibility granted for 2020, most

of which has already been incorporated within the second EUR55 billion decree,"

said one of the sources, adding that state aid to support struggling firms would

not be included in deficit computations, in line with EU rules.

     The other source noted how Italy had spent much less than other European

countries such as Germany, allowing Rome more room for extra stimulus between

now and the end of the year, particularly if the economy contracts by more than

-8% and if aid from the EU's planned Recovery Fund arrives only in 2021.

     Governing coalition parties are already debating additional spending, for a

future decree at a time still be decided. But another source cautioned that it

not make sense to outline further measures before September, when the government

is expected to update its fiscal plan with new macroeconomic forecasts.

     "It is an option on the table, but it hasn't been yet defined and we need

to look at the timing as well," the source said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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