Italy shuts factories to halt Covid-19

March 27, 2020

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SOAVE: Italy has become the first western developed nation to idle most of its industry to halt the spread of the coronavirus, 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 virus deaths, is more in line with draconian measures taken by China than with declarations coming out of other democratic partners, who are at least a week or two behind Italy’s rate of virus infections.

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 to 100 billion euros of national wealth a month if 70pc 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, and will now shut down.

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 Thursday.

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 depending on the pace of contagion. It’s a sobering prospect for other countries in Europe and for the United States, where President Donald Trump has said he aims to have commercial businesses reopen by mid-April, despite warnings from health experts that that is unlikely. There has been no discussion of closing US manufacturing as a nationwide measure.

Unions in Italy have fought especially hard to have more sectors considered non-essential in order to protect workers. They won limits on activity at call centers as well as the production of plastic packaging, some paper and chemical products.

The powerful CGIL union confederation had said the government’s initial list counted 800,000 companies as essential, with workers numbering 7.5 million, or 57pc of the workplace.

Premier Giuseppe Conte announced the new industry closures this weekend, citing the biggest emergency the country has faced since World War II. Industrial activities allowed to continue include many related to health care, agriculture and food production.

In all, hundreds of thousands of small, medium-sized and large companies will be closed, with workers receiving partial salaries under short-term unemployment schemes that have been extended to even the smallest businesses.

The big concern for the small and medium-sized company owners that power Italy’s economy is how long the shutdown will last, and how hard that will hurt cash-flow and hinder a smooth return to business.

“If the shut-down is two or three months, it might be as simple as turning a light back on, because supply chains and logistics are very efficient, said Carlo Salvato, an expert in small and medium business at Bocconi University. But if the shutdown is longer and precipitates a deep slide in wealth, the patterns of consumption could change dramatically.”

Published in Dawn, March 27th, 2020