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Banking

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.

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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.



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