Italy warns of autumn funding crisis as EU summit claims unravel

Celebrations over the EU’s €750bn Recovery Fund have been rudely interrupted. Italy is already warning that the money will not come soon enough to avert an autumn liquidity squeeze.

Roberto Gualtieri, Italy’s technocrat finance minister, told leaders of the ruling coalition behind closed doors that the treasury will struggle to cover both a budget deficit near 12pc of GDP and to redeem a mountain of old debts coming due over coming months.

He urged a formal request to the EU’s reviled bail-out fund (ESM) to unlock €36bn of immediate pandemic loans, according to Il Sole. 

The warning stunned the Five Star Movement, still toasting what it mistakenly thought to be a triumph at the EU’s marathon summit in Brussels. Premier Giuseppe Conte was given a hero’s return in Rome, but it is now becoming clearer that he made large concessions for limited help. 

Italian treasury data shows that €39bn of repayments fall due in September, a further €39bn in October, and €42bn in November. The combination of roll-overs and the fiscal shock of the pandemic may push Italy’s financing costs to almost half a trillion euros this year.

“There is a massive borrowing need. Gualtieri must be looking at the figures and asking who is going to buy all this debt,” said Lorenzo Codogno, ex-chief economist at the Italian treasury and now at LC Macro.