Italy will inject €3.6bn into its economy to mitigate the impact of the largest outbreak of coronavirus in Europe as policymakers around the world consider the consequences of transport and supply disruptions resulting from efforts to contain the disease.
Roberto Gualtieri, Italy’s economy minister, said on Sunday the government would introduce tax credits for companies that reported a 25 per cent drop in revenues, as well as tax cuts and extra cash for the health system. The package will amount to 0.2 per cent of GDP, he told La Repubblica, and would come in addition to €900m worth of measures unveiled on Friday for the most severely hit regions.
Rome will simultaneously seek authorisation from Brussels to increase the budget deficit for this year, the Treasury said over the weekend. The eurozone’s third-largest economy, which was on the brink of recession before the disease, needs “shock therapy”, said Giuseppe Conte, Italy’s prime minister, on Sunday in an interview with il Fatto Quotidiano newspaper.
The move comes as investors and policymakers anticipate more harm to the global economy than previously thought. Global markets shed four months’ of gains last week over concerns the response to the spread of the new disease will hit economic activity and companies profit more heavily than initially anticipated.
Data released on Saturday showed that China’s manufacturing sector suffered the steepest decline in activity on record in February, leading some economists to warn that the country could report an economic contraction in the second quarter. Official figures suggest that the virus, known as Covid-19, is now spreading faster outside China, where it originated. Beijing reported 573 new confirmed cases and 35 deaths on Sunday, bringing the total number of confirmed cases on the mainland to 79,824.
On Friday Jay Powell, the Federal Reserve chair, signalled that the US central bank was considering cutting interest rates in response to the “evolving risks” to the US economy posed by the spread of coronavirus.
South Korea, with 3,736 cases and the largest outbreak outside China, has also announced new stimulus measures to help buffer the fallout for Asia’s fourth-biggest economy after a series of stoppages at the country’s factories prompted concerns over damage to the global technology supply chain.
The death toll in the country rose to 21 on Sunday and authorities reported that a 45-day-old infant was among the new infections, South Korea’s youngest case. With more than 1,500 confirmed cases and 29 dead, Italy is home to one of the largest coronavirus outbreak outside Asia. The country has placed 11 towns in the wealthy north — and their 50,000 residents — under lockdown until the end of next week, closed schools and universities, and cancelled football matches and fashion shows.
France has become the second-hardest hit country in Europe with 130 cases and two deaths recorded. After a cabinet meeting on Saturday, the government banned all indoor gatherings of more than 5,000 people and outdoor meetings. The Paris half-marathon and the last day of Paris agricultural fair were both halted. In Germany, the number of coronavirus infections more than doubled to 117 over the weekend, according to the Robert Koch Institute, a public health body.
The virus has spread across large parts of the country as cases were discovered in nine different western states. Finance Minister Olaf Scholz said on Sunday that the German government had the financial firepower to fund an economic stimulus programme should it become necessary. Accountancy firm EY last week asked 1,500 employees in Düsseldorf and Essen to work from home after one employee tested positive.
Iran which has recorded the highest death toll due to coronavirus outside mainland China, said at the weekend that casualties had risen to 54, from 43 on Friday. This is out of a total of 978 cases officially reported — a figure that increased from 593.