Italy

About one in seven Italian companies could be at risk of going bankrupt if new COVID-19 outbreaks prompt the government to impose fresh lockdown measures, Cerved Rating Agency said on Tuesday. Cerved has updated a February study that assessed the pandemic’s impact on Italian companies, based on a sample of 30,000 businesses, Reuters reported. That study found that up to one in 10 Italian businesses could be at risk of bankruptcy.

This week as small businesses across Italy reopened after nearly two months of lockdown, Franco Magliocchetti, a 32-year-old restaurateur in Rome, spent most of his day sat glancing at rows of empty tables. Mr Magliocchetti and his business partner, Fabio Trovato, are crossing their fingers that the lifting of restrictions will see the country bounce back from what is forecast to be the sharpest recession in its modern history.

Italian industrial production fell almost 30% as companies were crippled by a near total lockdown on the economy caused by the coronavirus pandemic, Bloomberg News reported. Production fell 28.4% in March from the previous month, national statistics bureau Istat said Monday. Production of machinery and equipment, one of Italy’s main exports, weighed the most on the overall figure with a 39.7% decline. Textiles plunged 51%. Italy, one of the original epicenters of the virus in Europe, began a regional lockdown in late February before expanding to the whole country in early March.

Italy’s UniCredit posted its biggest quarterly loss in three years on Wednesday and cut its profit outlook for 2021 as the coronavirus pandemic threw its strategic overhaul off course, Reuters reported. Chief Executive Jean Pierre Mustier told analysts there was too much uncertainty to provide profit guidance this year and it would be late 2020 or early next year before he could update them on a turnaround plan he had unveiled in December. “It is too early to quantify the shape and pace of any recovery and hence to give any updated guidance on the full year ...

The projected surge in public deficits caused by the coronavirus pandemic has rekindled concerns about the sustainability of euro-area government debt, the Financial Times reported in a commentary. Such concerns are kept at bay for now by the European Central Bank’s massive purchases of government paper through its “quantitative easing” operations. Indeed, as long as public debt stays idle in the ECB portfolio, rollover risks are correspondingly reduced.  But what if inflation were to climb?

While business owners around the world are facing crisis, keeping afloat the smaller companies with less than €100m in revenues that are the backbone of the Italian economy is a particularly acute challenge, the Financial Times reported. This is partly because there are so many of them and partly because of the way they traditionally fund themselves: with short-term bank loans. Northern Italy is home to more than 2m businesses, according to Prometeia, a research and consulting firm.

Fitch has downgraded Italy’s credit rating to a single notch above “junk”, saying the jump in debt levels resulting from the coronavirus crisis will increase doubts about the sustainability of Rome’s borrowings, the Financial Times reported.

Market gauges measuring euro break-up risk emanating from Italy are starting to flicker, flagging the risk that another existential crisis may be building for the euro zone. Hit hard by the coronavirus pandemic, Italy faces recession and massive debt increases, Reuters reported. It’s also been left disillusioned with the response from wealthier northern European states to calls for help. On Thursday, EU leaders agreed a trillion-euro emergency fund to finance recovery from the pandemic but provided few details.

Banco BPM SpA may deepen cost cuts and branch closures and slow planned investments as the coronavirus pandemic weighs on profitability, Chief Executive Officer Giuseppe Castagna said, Bloomberg News reported. Italy’s third-largest bank unveiled its four-year strategic plan just days before the country entered a nationwide lockdown, with a 0.1% contraction as its worst-case scenario for the economy. Bloomberg Economics now expects output to shrink by more than 13% over the full year.

UniCredit boosted its provisions for potential loan losses by €900m in preparation for a sharp economic contraction, an early indication of the severe impact the coronavirus pandemic will have on the fragile European banking system, the Financial Times reported. Italy’s largest bank by assets made the decision after estimating that the eurozone gross domestic product will shrink 13 per cent this year, before a 10 per cent rebound in 2021, according to a statement on Wednesday. It stressed that the “unprecedented situation” made financial forecasting “difficult”.