Italy wants to reopen. Businesses ask: where’s the money?

Italy wants to reopen. Businesses ask: where's the money?
Italy wants to reopen. Businesses ask: where’s the money?

When the COVID-19 pandemic forced Roberto Ferraro to shut the patisserie he runs in Amelia, a scenic hilltop town in central Italy, he had just rented out a new site to increase the production of ice cream and start selling it abroad.

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Ferraro would like to be preparing his business to reopen in the weeks to come, working out how to secure supplies and ensure social distancing among customers. Instead, the 51-year-old is devoting his time and energy to wading through the pile of documents he must file with banks to tap state-guaranteed loans.

His struggles are just one example of how red tape is holding up the state aid needed to keep companies afloat in the euro zone’s third-largest economy and a country that has suffered Europe’s deadliest coronavirus outbreak.

“When can I get the money? The banks don’t know. It depends – days, weeks, they don’t know,” Ferraro said. “In March we paid electricity bills and wages even though the government had closed us down and, unlike supermarkets, we couldn’t sell Easter cakes.”

Rome’s problems getting money to businesses are reflected, to a greater or lesser degree, in other countries under coronavirus restrictions around the world, from the United Kingdom to the United States.

Italy, the first Western nation to shut down, is now in the vanguard of moves to cautiously reopen its economy. From May 4, shops like Ferraro’s can provide takeaways, and they will fully restart from June 1.

But the aid deployment figures so far are worrying for business leaders and politicians alike.

The government says debt guarantees made available by the state can unlock up to 740 billion euros ($803 billion) in funding for businesses which have been crippled by a seven-week lockdown.

So far just 3.1 billion euros in funds have been released, the Treasury said at the weekend. Of that, only 115 million euros are in the form of loans worth up to 25,000 euros fully secured by the state, which do not require banks to perform credit analyses on borrowers.

The financial stakes are higher for Italy than many others in Europe because its economy was faltering even before COVID-19, and the pandemic hit hardest in the northern industrial heartlands that generate a third of its output.

If loan lifelines arrive too late for the 2.1 million firms which have been unable to operate, Rome will likely fail to prevent a raft of bankruptcies despite aid spending which is set to push public debt to 156% of GDP this year, economists say.

“One of the most controversial aspects of the measures is the impression the government gave that the money was just sitting there and all people had to do was turn up at their bank,” said Salvo Politino, deputy president of business lobby Unimpresa.

The Italian Treasury declined to comment.

Economy Minister Roberto Gualtieri has rebuffed criticism over the liquidity measures, saying they are immediately effective and provide “impressive firepower”.

RUM-SOAKED BABA

Before the pandemic, the popularity of Ferraro’s rum-soaked “baba” cake whose secrets he had learnt in his native Naples, had allowed his business to expand without any bank debt in the five years since he opened.

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