Italy

Italy is working to extend by 12 months a state guarantee scheme designed to help banks shed problem loans, two sources familiar with the matter said on Tuesday, as the industry braces for a surge in pandemic-driven defaults, Reuters reported. Authorities are focusing on how best to help banks deal with the fallout from the coronavirus crisis, once governments unwind extraordinary measures they deployed to support businesses.

Italy’s two houses of parliament gave the go-ahead on Wednesday for Prime Minister Giuseppe Conte to approve a contested reform of the euro zone’s bailout fund, known as the European Stability Mechanism (ESM), at an EU summit on Dec. 10-11, Reuters reported. Last week some 60 rebels from the co-ruling 5-Star Movement, which has always opposed the reform, threatened to vote against the government, leaving it potentially vulnerable to defeat.

Economic activity in Spain and Italy’s services sector has hit a six-month low according to a widely watched business survey, as consumer companies bear the brunt of lockdowns to battle the spread of coronavirus, the Financial Times reported. Italy’s IHS Markit purchasing managers’ index for services fell for the third consecutive month to 39.4 in November, while the Spanish index fell for the fourth consecutive month to 39.5. A reading below the 50 mark indicates that a majority of businesses reported a contraction in activity from the previous month.

Prezzo, the Italian restaurant group, is being sold to real estate company Cain International, the latest in a series of casual dining chains to change ownership as the pandemic piles more pressure on an industry struggling with high debt and too much competition, the Financial Times reported. Cain, a privately held, London-based group that has invested more than $5.9bn in real estate debt and equity since it was founded in 2014, will buy the company as a going concern, it said in a statement on Wednesday.

Italian former prime minister Silvio Berlusconi said on Tuesday his Forza Italia opposition party would not back a reform of the euro zone bailout fund, a move that puts the government in difficulty ahead of a crucial parliamentary vote, Reuters reported. Reform of the fund, known as the European Stability Mechanism (ESM), has lacerated the ruling majority. The 5-Star Movement - the biggest party in parliament - says it would increase the risk of a public debt restructuring.

France’s Credit Agricole offered to buy third-tier Italian lender Creval for 737 million euros ($875 million) on Monday, as a wave of consolidation sweeps Italy’s banking sector, Reuters reported. France’s No.2 bank had been considering expanding in Italy, its second biggest market, and both Creval and larger rival Banco BPM had been tipped as possible targets. Credit Agricole Italia will pay 10.5 euros per Creval share, a 21.4% premium on Friday’s closing price. Shares in Creval jumped 23.7% slightly surpassing the offer’s price. Credit Agricole closed up 3.9%. Banco BPM declined 3.7%.

Lockdowns in France and Italy are weighing down public mobility more than in other European countries, according to high- frequency data compiled by Reuters that suggest the two economies will take a correspondingly bigger hit, Reuters reported. Data ranging from use of Apple maps apps to Google’s user location history are proving vital tools for governments, central bankers and investors trying to gauge the economic impact of restrictions, weeks in advance of conventional indicators like consumer spending or industrial output.

Italy will use its forthcoming presidency of the Group of 20 major global economies to try to secure further debt relief for African states, a senior Italian diplomat said on Friday, Reuters reported. Italy takes over the annual rotating presidency of the G20 on Dec. 1 and will look to build on a deal struck by major international creditors in April that was aimed at relieving the world’s poorest nations of debt payments.

Italy plans to widen an existing guarantee scheme for bank loans in a move that will help the country’s lenders cope with any future defaults sparked by the pandemic, a draft of the 2021 budget showed, Reuters reported. Italian banks have raised alarm about the combined effect an obligation to write down problem loans in full over a set number of years could have when coupled with a stricter definition of default kicking in soon and the troubles virus-hit businesses will face once weaned off emergency support schemes.

Services companies in Italy and Spain suffered a fresh fall in activity last month as restrictions to contain the second wave of the coronavirus pandemic hit businesses, according to a widely watched business survey, the Financial Times reported. The IHS Markit flash services purchasing managers’ index dropped in both countries, with companies reporting sharp declines in demand and activity as a result of the pandemic, data released on Wednesday showed. The Spanish index was slightly better than most economists expected but still fell 1 point to a five-month low of 41.4 in October.