Italy, coronavirus outbreak threatens the economy
Even Il Salone del mobile, the world-famous furniture fair, was postponed after the eruption of infection cases in Italy. That's a shock for Milan, but the outbreak can jeopardize the whole economy
by Alberto Magnani
4' di lettura
For Milan, the design Mecca of Italy, few events could be more relevant than its Salone del mobile, a world-famous furniture fair. One of them turned out to be the sudden outbreak of coronavirus, the infection that is spreading around the world since it was first detected last January in the Chinese province of Hubei. “Il Salone”, as Milanesi sometimes refer to it, was postponed from Aprile to June after Italy had the dubious honor of becoming the virus' epicenter in Europe. Alas, this is unlikely to be the last bad news. The outbreak of coronavirus is threatening the growth of Lombardy, the region that encompasses Milan and is widely regarded as Italy's economic powerhouse.
Outlooks are gloomy. Ignazio Visco, president of the public-owned Bank of Italy, foresees that GDP will fall by 0.2% in 2020. Nomura, an investment bank, stated that coronavirus can make the Italian GDP dip by 0.1% in the same year. That would mean sinking an economy that is already on the brink of recession and struggles to comply with the European Union budget targets. Italian Prime Minister Giuseppe Conte already warned that the economic impact of the outbreak will be “very strong” and called it an “economic emergency”. “We'll offer an unbelievable economic answer to this” Mr. Conte said.
The economic engines risk to stall
The biggest fear is that Milan and high-performing northern Italy may end up being paralyzed by the virus. The two clusters of the infection, Lombardia and Veneto, make up more than 30% of the Italian GDP.
According to Istat, the national institute of statistics, Lombardy alone accounts for more than 22% of national GDP (390 billion euros out of 1.7 trillion euros) while Veneto accounts for more than 9% (163 billion euros). Lombardia is home of more than 900,000 firms and its export topped 127 billion euros in 2018, a +5,2% year by year increase. “We cannot let Milan be isolated” said Attilio Fontana, the governor of Lombardy.
Yet it is still unclear how to avoid it. Nine out of the 10 “red zones” find themselves in Lombardy. Milan is already stuck in an uncharacteristic quietness as schools, museums, theaters, cinemas, and bars were closed due to security reasons. The city's central station, usually packed with thousands of passengers, is described as nearly desert. The two city's airports, Malpensa and Linate, fear a decrease of influxes as more countries are either quarantining or rejecting passengers flying from Italy.
Don’t stop me now
Despite this, business goes on as usual. An increasing share of Milanesi and northern firms are experimenting “smart working”, that is to say making people work from home rather than on their bureau's desk. Schools and universities are putting themselves on the test by streaming lectures and considering to introduce e-learning modules. Paradoxically enough, the surging crisis may turn into a boost for the Italian long-waited “digital transformation”. Some analysts are less optimistic, as flexibility takes time to be deployed - and Italy needs quicker help.
On a larger scale, the Italian government plans to introduce exemptions and tax cuts. Small and medium enterprises threatened by the coronavirus emergency can be eligible for a guarantee fund aimed at sustaining local firms amid the crisis. The Economy Minister is also in talks with Abi, the Italian bankers' association, to agree on a temporary stop of installment payments. Despite phobia surged as the first cases were reported, health officials are warning not be panicked. Ilaria Capua, a virologist and former MP, claimed that the outbreak was so evident in the country because Italy took its precautional measures earlier than what other EU countries did. The neighbor France woke up in a similar emergency-mood as 17 cases and one death were reported in the country.
Italy to ask for flexibility on the EU budget
The outbreak is alarming the European Union, too. The European Commission announced 232 million euros in new funding to fight the virus and the matter, according to the website Politico, will be on top of the agenda of an EU-African Union summit taking place in Addis Ababa (Ethiopia) later this week. Meanwhile, Italy can aim at something more from Brussels. Laura Castello, the Deputy Economy Prime Minister, told the Italian broadcaster Radio Rai that the country could ask for more flexibility on its budget targets. Italy, Mrs. Castello says, may be entitled to some additional leeways to best contain the outbreak.
Officials from the World Health Organization and the European Union gathered in Rome on Tuesday to discuss how to contain the spread of the virus in Europe. The budget was perhaps included in the package - though Italy had already tried to push for more flexibility weeks before the outbreak. Meanwhile, Milan and northern Italy keep waiting for some better updates on the crisis. Commuters usually love to grumble about how crowded public transports are, but these days it is easy enough to take a ride with just a bunch of people around. The phobia of the virus is emptying buses and subways as passengers fear to be contaminated.
Some workers can't wait to jump on the subway and not to find a free seat. It may seem stressful, but it would mean that things are going back to how they used to be.