What are the future prospects which will open up with the so-called “phase 2”? From the “Cura Italia” decree to the “Liquidità” decree, let us try to clarify what is being done to ensure the survival of companies and workers
by Raffaele Calcagni
At this time of great uncertainty worldwide, when the certainties we had only three months ago have vanished and the most clicked words on the Internet have become “Coronavirus” and “Covid-19”, let us try to take stock, as far as possible, of the future prospects which with the so-called “phase 2” will open up.
A 400 billion euro “bazooka”
200 billion in loans guaranteed by the State up to 90% for all companies, 200 billion in export guarantees, strengthening and simplification of the Central Guarantee Fund for SMEs, loans guaranteed up to 100% for the self-employed. With a decree approved by the Council of Ministers, an unprecedented intervention in support of the Italian production system is carried out. A real “bazooka” of liquidity, with over 400 billion in guarantees bringing the mobilised credit to over 750 billion euro. The intervention aims not only to defend and preserve the industrial framework of the country from the economic consequences of the Coronavirus, but also to help companies to restart. The State guarantees amounting to 200 billion are granted through Sace in favour of banks which provide financing to companies. Specifically, the guarantee will cover between 70% and 90% of the amount financed, depending on the size of the company, and is subject to a number of conditions including the impossibility of distributing dividends for the following twelve months and the necessary allocation of the loan to support expenditure on productive activities located in Italy.
The ‘Cura Italia’ decree
In turn, the so-called “Cura Italia” decree introduces economic support measures for families, workers and businesses related to the Covid-19 emergency. The decree intervenes on four main fronts. First, with funding and other measures to strengthen the National Health Service, the Civil Protection System and other public organisations involved in the emergency. Second, with support for employment and workers for the defense of jobs and income. Third, with support for credit for households and micro, small and medium-sized enterprises, through the banking system and the use of the central guarantee fund. Finally, with the suspension of payment obligations for taxes and contributions as well as other fiscal obligations and tax incentives for workplace sanitisation and rewards for employees who remain in service.
Measures adopted previously
The measures are in addition to those already adopted, to prevent the crisis in economic activities caused by the Covid-19 epidemic from having permanent effects, such as the irreversible disappearance of businesses in the sectors most affected. Specifically, with the previous interventions, tax obligations and payments of contributions and mortgages for the inhabitants of the former “red zone” have been suspended, social welfare benefits have been made available to people who do not normally benefit from them, and smart working methods have been strengthened. The exceptional redundancy fund has been extended to the entire national territory, to all employees, in all productive sectors. Employers, including companies with less than five employees, who suspend or reduce their activities as a result of the epidemiological emergency, may use the exceptional redundancy fund with the “Covid-19” cause for a maximum period of nine weeks. This possibility is also extended to companies which already benefit from the extraordinary redundancy fund.
The ‘Liquidità’ decree comes into force
With the publication of the “Liquidità” Decree in the Official Gazette, measures to support companies, artisans, self-employed persons and professionals have become operational. In order to facilitate the restart of the Italian production system, once the current health emergency will be overcome, it has been decided to transform the Guarantee Fund for SMEs into an instrument capable of guaranteeing up to 100 billion euro of liquidity, increasing the financial endowment and extending its use to companies with up to 499 employees. A streamlined procedure for access to guarantees from the Fund is also envisaged, which will operate along three lines: a 100% guarantee for loans not exceeding 25% of revenues up to a maximum of 25,000 euro, without any credit rating; a 100% guarantee for loans not exceeding 25% of revenues up to 800,000 euro, without any performance appraisal; and a 90% guarantee for loans up to 5 million euro, without any performance appraisal. In addition, the possibility of granting state guarantees to companies on bank loans through Sace has been introduced, as well as measures to strengthen the instruments to support exports, globalisation and investment by companies. Golden Power legislation has also been extended to protect SMEs and major production chains. Finally, the decree strengthens public support for exports thanks to a system whereby 90% of the commitments deriving from Sace’s insurance activity are taken up by the State and 10% by the company.
What are the first obstacles
A survey by Unimpresa, however, shows that practices have been fully implemented only for loans of up to 25,000 euro, while procedures continue intermittently for loans of up to 800,000 euro. For operations above 800,000 euro, internal procedures and circulars are still lacking in almost all banks.
Unimpresa’s figures show an uneven picture, with banks’ internal rules evolving. The most questionable element continues to be the request for extra documentation, such as the tax declaration which, on the other hand, for loans of up to 25,000 euro may be replaced by a simple self-certification. Some banks also take advantage of the possibility of closing and paying off loans granted in the past by taking advantage of 80% State guarantees. However, the very nature of the measures is criticised by many parties: the majority of companies would prefer “non-repayable” subsidies rather than repayable loans, albeit at a subsidised rate and spread over time.
The world will be different
In conclusion, as has been stated by various sources, after the pandemic the world will never be the same again. However, the current objective remains to ensure the survival of businesses and jobs. And, amidst a thousand difficulties and hesitations, the whole world seems to want to move in this direction.