MNI SOURCES:Italy Readies EUR40-50B+ Spending, Depending On EU

By Silvia Marchetti

     ROME(MNI) - Italy is preparing a decree for April to authorise an

additional EUR40-50 billion in coronavirus response spending, or more, depending

on how much assistance Italy secures at a European Union summit next week,

sources told MNI.

     "Somewhere between EUR40 billion and EUR50 billion is a realistic amount

for phase 2 decree in April needed to tackle the economic impact of the virus in

the medium term, but it probably won't be enough in the long-term," said a

source familiar with budget issues, adding that further expenditure to rebuild

the economy could be authorised in the summer.

     Another source said the decree could authorise as much as EUR60 billion in

spending, depending on the extent of the resources Italy secures at the European

Council meeting set for April 23. A source from the 5-Star Movement, which

shares the governing coalition, concurred, saying that the Italian government's

next steps depended on the "concessions Germany and the northern bloc" were

prepared to make to support Italy's financial needs.

     Italy's GDP could contract by 6-11% this year if the economy "unfreezes" by

early May, said officials from the coalition's Democratic and Italia Viva

parties, acknowledging that this was a "rosy" scenario. But even if the partial

lockdown drags on, the economy should still begin to recover in the second half,

they said.

     --LONG-TERM THINKING POSTPONED

     The upcoming decree should include some EUR30 billion for a liquidity fund

for companies and EUR12-13 billion for unemployment benefits, pushing up a

planned fiscal deficit to be approved by parliament in a vote set for after the

European Council.

     Additional resources could be allocated in June for post-crisis economic

reconstruction, added the first source, adding to what will be a revised 2020

deficit figure to be updated in September.

     "Our borrowing requirements keep growing now, so we can't afford to think

too much in long-run terms as to how many resources we need. We need these now,"

the first source said.

     In March the government earmarked roughly EUR30 billion in virus spending.

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

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