(Bloomberg) -- Italy will double the amount planned to help contain the impact of the coronavirus outbreak on the economy to 7.5 billion euros ($8.4 billion.)
The announcement marks a dramatic escalation in the government's response, which has so far included measures such as a nationwide closure of schools and a ban on public events.
With its economy already at risk of recession before the outbreak, the crisis has all but paralyzed business activity in the country's rich northern regions -- home to major companies including carmaker Fiat Chrysler Automobilies NV. It has also piled more pressure on the country's fragile governing coalition, with partners demanding ever-higher spending.
The funds will be used to “help families and businesses tackle this emergency which is not just a health one but also an economic one,” Prime Minister Giuseppe Conte said at a joint press conference with Finance Minister Roberto Gualtieri in Rome Thursday.
“No one must lose their job because of the coronavirus,” Gualtieri said.
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The extra spending will lead Italy to break its budget deficit commitments by 6.35 billion euros, or 0.35 percentage point of gross domestic product. Italy is already in talks with the European Commission to be granted the necessary flexibility.
The extra spending is a one-off, Gualtieri said in a letter to Commission economic chiefs Valdis Dombrovskis and Paolo Gentiloni, and will push Italy's deficit in 2020 to 2.5% of GDP from an earlier commitment to 2.2%.
Read More: $54 Billion and Counting: U.S., Europe and Asia Respond to Virus
Details of the stimulus program will be presented next week, and will have to receive parliamentary approval, according to the finance minister.
“The package consists primarily of an increase in the financial resources for the wage supplementation fund and for financial assistance to the most affected sectors and firms,” Gualtieri wrote. “We will provide extra funding for the public health-care system, civil protection and security forces.”
What is missing, according to Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan's Bocconi University, are “measures which can mobilize much bigger private investment.”
With more than 3,000 cases and over 100 dead, Italy is preparing for a prolonged period of disruption. Sweeping containment measures announced Wednesday include holding sporting events behind closed doors and the advice to elderly people to avoid leaving home unless necessary. The school closure can be extended beyond its current plan of March 15, Conte said.
To contact the reporters on this story: John Follain in Rome at jfollain2@bloomberg.net;Marco Bertacche in Milan at mbertacche@bloomberg.net
To contact the editors responsible for this story: Alessandro Speciale at aspeciale@bloomberg.net, Alaa Shahine, Zoe Schneeweiss
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