Coronavirus: Italy’s banks and SMEs face crisis if shutdown persists
Debt forgiveness may stave off an immediate banking crisis in the country hardest hit so far, but the longer-term outlook is grave.
Duomo square, Milan, on Wednesday: devoid of the usual throng of people on the second day of a lockdown across Italy
Italy could provide a showcase for what is to come elsewhere in Europe as businesses are hit by the effects of the rapidly spreading coronavirus: people staying at home and not spending.
Italy’s financial sector and public finances are uniquely vulnerable to the Covid-19 crisis. Business loans, above all, are under threat, as Italy’s economic structure is particularly reliant on small and medium-sized businesses, while its judicial system has routinely proved itself incapable of processing collateral claims sufficiently quickly.