The coronavirus crisis has taken its toll on Italy and the EU was seen as slow to react
When Covid-19 came to Europe it was Italy that was hit first – and hit hard.
Little help came from its European neighbours in those first weeks in February and March, as hospitals in the north were overwhelmed.
As Italy counts its 31,000 dead, concern is mounting over the economic impact too, and there are signs of a rise in the number of Italians losing faith in the EU.
The Treaty of Rome launched the then European Economic Community in 1957, with Italy a founding member.
“I have changed my mind a little on Europe. We are facing an absolute emergency, and seeing countries turning their backs on each other is really awkward,” says Rome real estate agent Marco Tondo, 34.
He is currently receiving nine weeks’ redundancy pay from the government at 80% of his normal salary.
Marco Tondo says the crisis has altered his views on Europe
According to a survey of 1,000 Italians conducted in April by Tecné, 42% of respondents said they would leave the EU, up from 26% in November 2018.
However, a quarter of that number said they would be prepared to stay in the bloc if Europe approved concrete measures for Italy.
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Italy went on full lockdown on 8 March and tight restrictions on life were only relaxed on 4 May.
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The country’s economic output will fall by 8% this year, according to the government of Giuseppe Conte. That scale of downturn will bloat Italy’s public debt this year to the tune of almost 155.7% of GDP, Italy’s National Institute of Statistics forecasts.
How has Europe responded?
When the health crisis broke out, Mr Conte called for the creation of coronabonds, which would have been underwritten by all eurozone members to share the burden of economic recovery.
But within days Germany and the Netherlands had ruled out any kind of debt mutualisation. That didn’t go down well in Italy. Critics said the prime minister had been humiliated in the EU.
“Asking for coronabonds was the perfect way to have the door slammed in his face,” argues Carlo Altomonte, associate Professor of Economics of European Integration at Bocconi University.
“Mutualisation of debt is forbidden by EU treaties and Germany’s constitution. I think Conte used it as a weapon in negotiations.”
Media captionItalian PM Giuseppe Conte told the BBC that the outbreak threatened the future of Europe
On 18 March, the European Central Bank launched a €750bn (£660bn; $800bn) bond purchase programme to help the eurozone’s more indebted countries by pushing down borrowing costs.
Two days later, the European Commission announced the suspension of rules on public deficits, thus allowing countries to inject as much money as they needed into their economies.
Then, on 8 April, the Eurogroup of eurozone finance ministers agreed on a €540bn rescue plan. It was made up of:
€200bn as a new credit line for companies, provided by the European Investment Bank
€100bn in loans to support temporary unemployment schemes
€240bn as a credit line provided by the European Stability Mechanism (ESM) to fund eurozone health systems.
The political debate in Italy has focused mostly on that last part of the package. The unpopular ESM is an intergovernmental bailout fund that provided loans to Greece and some other EU countries during the financial crisis and dates back to 2012.
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According to the Eurogroup, loans will have interest rates close to 0.1%, but the money will be used only “to support domestic financing of direct and indirect healthcare, cure and prevention-related costs due to the Covid-19 crisis”.
How has Italy reacted?
Italy could borrow up to €37bn from the ESM, but has still to decide whether to ask for the loans.
The two parties that make up the technocrat Mr Conte’s coalition government have often held contrasting positions on European issues, and that is the case too concerning borrowing from the ESM.
The centre-left Democratic Party backs the idea. But the anti-establishment Five Star Movement has warned the government would collapse if Mr Conte were to tap into the bailout fund.
“The Italian parliament will decide whether or not it is appropriate for Italy to activate it,” Mr Conte finally said, after repeatedly refusing to make use of the ESM.
Media caption”We risked everything to survive” – Naples resident Filomena
The main objection is from the far-right League party, which used to be in government but is now in opposition.
“The ESM is not a gift, it’s money lent, to be repaid at precise conditions chosen in Brussels and not in Italy,” said its leader Matteo Salvini. “We must re-found the EU on new principles and go back to having control over money production. We need to print money,” he argued.