(Bloomberg) — Italy’s government approved an extra pandemic relief package for businesses hit by the country’s second lockdown.
Prime Minister Giuseppe Conte’s cabinet signed off early Saturday on the new measures, which extend support to more companies compared to an earlier 5 billion-euro ($5.9 billion) aid decree. Italy is expected to add 2.5 billion euros in spending with the new program, according to officials familiar with the discussions.
With Covid-19 surging in Europe, Italians are prohibited from leaving or entering cities in high-risk areas, including Milan, Italy’s financial hub, and key northern industrial cities. The extra aid seeks to shield companies and families in the highest-risk areas.
“We increased indemnities as we figured out the ones we implemented during the lockdown in the spring were not enough,” Conte, 56, told Il Corriere della Sera in an interview. The premier defended his strategy of local lockdowns amid protests from regional leaders. “Rejecting this mechanism would let the country crash into a national lockdown,” he said.
Contributions to businesses hit by the latest restrictions are 50% higher than those distributed in the first national lockdown. The new plan also suspends November VAT payments in the high risk areas, cancels part of local levies and delays income taxes. Other measures include a babysitter bonus of as much as 1,000 euros for families in lockdown areas.
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Italy’s lockdown, while more limited than those imposed nationwide in the spring, jeopardizes a fragile economy. The country’s budget assumes that gross domestic product could shrink by 10.5% this year in a worst-case scenario, and expand only 1.8% in 2021.
The government had previously approved 100 billion euros in stimulus to protect Italian companies and jobs. That is pushing Italy’s debt, the euro area’s second-biggest, to almost 160% of output.
With virus cases mounting and the risk of expanding and lengthening lockdowns, Conte may be forced to ask parliament to widen the deficit before the end of the year. Italy is set to receive 209 billion euros in grants and loans from the European Union’s recovery fund for investments that could help boost growth in coming years.
(Updates with premier’s comments from fourth paragraph.)
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