Italy to Double Stimulus as Europe Ponders Next Virus Moves

(Bloomberg) —

Italy plans to more than double an economic stimulus package, and Spain will seek to extend emergency powers as European leaders carefully weigh their next moves to combat the coronavirus crisis.

With more than 100,000 fatalities in the region, Europe’s leaders are seeking to strike a balance between saving lives and securing jobs. The first steps to loosen curbs in Austria, Denmark and Norway have put pressure on other countries to follow suit, despite the lack of treatments or a cure. The concern is that the crisis could be longer and deeper if infection rates rise again.

Alongside efforts to protect public health, Italy and Spain — the epicenters of the pandemic in Europe — are preparing more resources to limit the damage to their economies.

Ahead of a planned restart schedule, Italian Prime Minister Giuseppe Conte’s cabinet is expected to seek parliamentary approval to broaden the budget deficit by about 55 billion euros ($60 billion), according to officials close to the discussions.

To counter a looming recession, Conte pledged to senators in Rome on Tuesday to deliver a package worth no less than 50 billion euros, following an initial 25 billion-euro plan approved by his government last month.

Italy’s response to the crisis will plunge the country further into debt, with a deficit of more than 10% of gross domestic product this year, the officials said. Conte, who is pressing European Union partners for joint-debt issuance, signaled readiness to soften Italy’s red lines ahead of key talks on Thursday.

Spain’s parliament on Wednesday will vote on Prime Minister Pedro Sanchez’s request to prolong a state of emergency for two weeks through May 9.

The health ministry reported a small increase in the number of new cases and deaths Wednesday, and overall the numbers remain steady. More than 20,000 people have died from the disease in the world’s most extensive outbreak after the U.S. and some 86,000 have recovered.

The country made its first move on Tuesday to relax curbs. Children under 14 will be allowed out of their homes as of April 26 for walks, in the company of an adult and following social-distancing and health rules.

Spain is considering pledging additional funds to help companies pay their suppliers on time, a move that aims to stave off the collapse of businesses struggling to survive the crisis. Sanchez’s government has already vowed to guarantee as much as 100 billion euros in bank loans to help companies tackle cash-flow problems, amid concerns it won’t be enough.

Germany’s ruling parties will hold talks on the virus response on Wednesday evening amid tension over the pace of loosening curbs designed to limit contact between people. Chancellor Angela Merkel warned earlier this week the “discussion orgies” over easing restrictions risked leading to more outbreaks and a return to stiffer measures.

Controversial Projects

While no major decisions are expected at the meeting of Merkel’s conservative bloc and the Social Democrats, topics for the coalition partners include a possible increase in cash for furloughed workers, SPD proposals for a “wealth tax” to help replenish public finances and aid for hotels and restaurants hammered by the crisis. Some controversial projects like an increase in the minimum wage may spark fresh strains as priorities shift because of the crisis.

The number of new coronavirus cases in Germany stayed close to a three-week low as the country allowed small shops and hardware stores to open starting on Monday. There were 1,388 new cases in the 24 hours through Wednesday morning. The reproduction factor — a gauge of the speed of the disease’s spread — was unchanged at 0.9 on Tuesday.

The Netherlands became the latest country to begin easing restrictions. Dutch primary schools and daycare centers will start to reopen on May 11, Prime Minister Mark Rutte said on Tuesday, after the nation reported the fewest new cases in almost a month, noting that every move carries risk.

“I say it outright, we are faced with devilish dilemmas,” Rutte told reporters at a televised briefing in The Hague. “The corona-crisis is probably one of the biggest, most fundamental, most threatening periods in our lifetimes.”

(Updates with latest Spanish figures in eighth paragraph)

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