Italy shuts down industries

ITALY has become the first Western developed nation to idle most of its industry to halt the spread of the Covid-19 pandemic in a potential cautionary tale for other governments, such as the Trump administration, that are resisting such drastic measures.

After more than two weeks of a nationwide lockdown, the Italian government decided to expand the mandatory closure of non-essential commercial activities to heavy industry in the eurozone’s third-largest economy, a major exporter of machinery, textiles and other goods.

The move by Italy, which is leading the globe in the virus’s death toll, is more in line with draconian measures taken by China than with declarations coming out of other democratic partners.

The industrial closures put in stark contrast concerns over protecting lives in a country with an especially vulnerable aging population against fears of hurting an economy that already was on the brink of recession.

The industrial lobby Confindustria estimates a cost of €70 billion (R1.3 trilion) to €100bn of national wealth a month if 70% of companies are closed, as anticipated. Though some big companies had already suspended activities, thousands of smaller manufacturers had continued after adopting new safety regulations.

“We are entering a war economy,” said Confindustria president Vincenzo Boccia.

Economists grew dizzy speculating on the possible economic drag in a country that never fully recovered from back-to-back recessions the last two decades. UniCredit bank’s chief economist, Erik Nielson, expects the economy to shrink by a staggering 5% to 15% this year – and that assumes a recovery toward the end of 2020 and takes into account a €25bn aid package and €350bn in credit lines. The Italian Treasury has put the virus hit at 5% to 7% of gross domestic product in 2020.

“The economic consequences of the suspensions risks to be unsurmountable, because the continuity of companies is being interrupted for a substantially undetermined period,” Il Sole 24 Ore, the respected business daily of the Confindustria lobby, wrote yesterday.

The government decree mandates the industrial shutdown for one week, but as with the rest of the harsh containment measures they are likely to be extended. | AP