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MNI EXCLUSIVE: Italy Mulls Ambitious Plan To Rebuild Economy

By Silvia Marchetti
     ROME(MNI) - Italy is already considering an ambitious financing and
investment plan to rebuild the country once the coronavirus emergency is over,
and is set to take advantage of bond yields which remain low despite their
recent surge to further boost fiscal spending in the meantime, governing party
sources told MNI.
     "We can afford our spending plans as long as we need to raise money. Yields
are good for now and we are on a sustainable path," said a source with the
populist 5-Star Movement. Officials from 5-Star and their coalition partners in
the Democratic Party and Italia Viva declined to give any estimate of additional
spending, saying that the damage to GDP from the epidemic, which has led to a
country-wide shutdown, was still impossible to evaluate, and that spending
measures would be announced as they become necessary.
     Another new stimulus package could come as early as next month, said the
     The European Commission has indicated it will allow eurozone states to
exceed debt limits as they respond to coronavirus. But the sources said the
European Central Bank must also move immediately to boost its quantitative
easing programme, as it promised March 12 when it said it would expand its QE
envelope by EUR120 billion. After this, the ECB should also raise the limits
imposed on its purchases of individual eurozone countries' bonds, they said.
     --NO ESM
     Italy's government is not asking for the ECB to buy its shorter-term bonds
bonds on the secondary market under its Outright Monetary Transactions rules,
and is not interested in seeking help from the European Stability Mechanism, the
sources said.
     "The ESM is a crisis management tool and if we open up the ESM funds, it
would be sending a destabilising message to markets of a potential EU-wide
catastrophe," said a 5-Star source, noting that a country must already be
subject to an ESM programme to qualify for OMT.
     Italy has earmarked roughly EUR25 billion to tackle the emergency, together
with loan guarantees for affected companies and a moratorium on loan and
mortgage payments.
     Most of the governing party sources, except for the small Italia Viva
party, were damning in their criticism of ECB President Christine Lagarde, who
has apologised for saying that it was not the ECB's job to defend bond spreads
in her press conference last week. The EU's response in general has been quite
disappointing to Italy, the 5-Star and Democratic Party officials said.
     "It's pretty clear that despite the announced QE boost and some weak EU
coordination, every country is left pretty much alone to fend for itself. This
crisis just proves how EU fiscal rules are fragile and inefficient in the
absence of a European common fiscal capacity or safe debt assets, and that each
country is free to spend what is deemed as necessary in times of need," said the
5-Star source.
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$]

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