Friday, 29 Sep 2023

Eurozone panic: Italy facing recession as country crippled by coronavirus – Brussels alert

Entire towns are quarantined in the north, the heart of Italy’s manufacturing and financial industries, and airlines have cut back on flights to the country, meaning millions fewer travellers are expected. The result is a loss of billions among the nation’s hotels, restaurants and popular tourist sites and many others. The turmoil is expected to push Italy back into recession and weigh more broadly on the European economy, with trade-focused countries like Germany, France and Britain also struggling with the global disruption to supply chains and travel.

Stefania Stea has two hotels in Venice, where the recent cancellation of the annual carnival emptied the city in a single afternoon and sent occupation rates plunging to an unheard of 1 to 2 percent.

Ms Stea, who is vice-president of the Venice hoteliers association, is tallying cancellations worth 7,000-10,000 euro (£6,000-8,500) a day for her 39 rooms – which are all currently empty.

She said: “I am getting cancellations through to June.

“The only reservations I am getting are for Christmas or New Year’s Eve, with people hoping for a deal.”

Italy’s economy is forecast to shrink this quarter, with Bocconi university economist Francesco Daveri predicting a 0.3 percent contraction.

That would match a surprise shrinkage in the last quarter of 2019 and would put the country in a technical recession.

The country has already shed 4 percent of GDP in back-to-back recessions in the first two decades of the century, and recovery has been stalled for the last two years.

Banks are still trying to burn off a pile of bad loans left over from the financial crisis a decade ago.

The government’s public debt load, the highest in Europe after Greece, limits the country’s ability to significantly ramp up spending to help the economy if needed.

The tourism and luxury industries were the first, but not last, to sound the alarm.

Tourism officials are projecting 32 million fewer foreign visitors because of the crisis.

The loss of 7.4 billion euro (£6.3 billion) in the second quarter alone, before the arrival of the make-or-break summer travel season.

Even before the virus arrived in Italy, luxury fashion officials projected a 2 percent first-half contraction.

That was based solely on weaker spending by Chinese consumers, who are the biggest luxury buyers in the world accounting for 35% of global sales.

Now the virus, which began in China, is discouraging well-heeled shopping tourists to Milan’s Monte Napoleone district and Rome’s via Condotti, while spreading to the US and European neighbours, key export markets.

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Making things more complicated is a lack of knowledge about the virus’s true risks and whether it is spread, for example, through exported goods.

Industry groups and policymakers have signalled incidents of importers of Italian goods in other EU countries seeking additional certification that the goods are virus-free.

Foreign Minister Luigi Di Maio this week protested against what he called indiscriminate limits on Italian exports.

He said: “It is not acceptable to block Italian goods or ask for a certificate of guarantee beyond what exists in commercial agreements.

“Merchandise does not have anything to do with the virus.”

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