Italy’s Conte Promises Europe Its Money Won’t Be Wasted

(Bloomberg) -- Prime Minister Giuseppe Conte set out an ambitious strategy to rescue a paralyzed economy and win over European partners to help fund it, on the day Italians were allowed to travel freely for the first time in three months.

The premier told reporters that spending from grants and loans from the European Union under a 750-billion euro ($841 billion) recovery plan proposed by the bloc's executive will test “the strength and credibility not just of the government but also of the Italian system.”

Conte, whose ruling coalition is plagued by constant infighting, charted a wide-ranging “new start” which stretched from more public and private investment to infrastructure including high-speed trains for the depressed South, a faster judicial system to attract foreign investors, and special tax status for poorer areas.

“We must be aware that the sum which is made available to us, that Europe will make available to Italy cannot be considered a treasure trove that the government currently in charge can spend freely,” Conte said. “This sum must be seen as a resource placed at the disposal of the whole country.”

Reform Package

The premier is battling to salvage an economy ravaged by bankruptcies and unemployment, with the risk of political and social tensions jeopardizing the stability of his coalition. Conte must also draw up a reform package to obtain support from the European Commission.

Read more on EU's recovery fund

Italy's economy shrank 5.3% in the first quarter, the most since the data series began in the mid-1990s. A deeper contraction is expected this quarter and the full-year slump is likely to exceed 10%, according to economists.

Conte stepped into a long-running dispute over whether to revoke concessions for toll-road operator Autostrade per l'Italia SpA, saying there was still every reason to do so. The issue is very complex, Conte added, saying that proposals for a negotiated solution are unsatisfactory so far and that the government will decide soon.

The premier reiterated an apology for delays in channeling aid including unemployment relief to economic sectors hit hardest by the lockdown. As Italy emerges from the containment measures, with schools still closed, Conte outlined priorities including broadband for all households, energy investments, and reducing bureaucracy.

“I appeal to all political forces to work on these projects,” Conte said, making a new call for opposition forces to join with the government on specific measures.

The government allowed Italians to travel freely between regions starting Wednesday, a move also aimed at helping the flagging tourism sector which accounts for about 13% of gross domestic product. Italy will now allow travelers from other EU states to enter without undergoing quarantines.

Conte's appeal for unity will probably fall on deaf ears however. Opposition leaders, including Matteo Salvini of the anti-migrant League, have accused Conte of ignoring them during the virus emergency, and have rekindled protests across the country despite continuing social distancing rules.

Italy smashed demand records at a sale of government bonds earlier Wednesday, just a day before the European Central Bank decides whether to step up support for the region's debt. The nation received orders of over 100 billion euros for its syndicated offering of 10-year debt.

Italy has to drastically ramp up bond sales in order to fund a growing fiscal deficit, with the country's debt as a share of economic output set to top 150% this year.