Why Draghi likes the recipe: aid to banks and businesses is not enough

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“We are inundated with requests for moratoriums from businesses.” “All entrepreneurs are asking for liquidity to cope with payments, from wages to rents, in this closing period.” Just talk to any credit or corporate manager of any bank (Il Sole 24 Ore did it with the major ones in Italy), to understand how heavy the situation is: businesses desperately need liquidity to stay alive while almost all Italy is barred at home. About 60% of the country’s production system is now at a standstill, which equates to something like 10-15 billion GDP lost every week. Unprecedented measures are therefore needed to prevent the temporary block from becoming a definitive crack for too many companies.

The problem is that the measures implemented by the Government with the Cura Italia decree are considered by all to be right, but insufficient. And while the ABI publishes a document asking for adjustments and further efforts, as if by magic the ex-president of the ECB Mario Draghi arrives and launches a truly drastic proposal in the “Financial Times”: banks give credit to businesses at no cost and once the emergency is over the state will take on this debt by erasing it from the corporate balance sheet. It would? The chorus of approval is unanimous. But to understand the reason we must start from the current situation.

Cura Italia (but not too much)

The decree passed by the government provides, in summary, two macro interventions. On the one hand the moratoriums: banks must keep credit lines to businesses unchanged; loans maturing in this period are automatically renewed; companies have the option to suspend payment of installments.On the other hand, the decree provides for state guarantees (through the central guarantee fund or the CDP) so that banks can lend money without taking excessive risks. If both measures are welcomed, the unanimous opinion among the experts is that this is not enough. «Short and short-arm intervention», they comment from a bank.

A problem lies in the fact that not all companies can access this aid. For example, the medium-large ones are left out. It is true that Italy is full of SMEs, which need a special attention, but it is also true that medium-large companies are at the head of the supply chains: if they go into crisis, they all suffer in cascades. This is why the ABI (and not only) asks to “extend the scope of the Guarantee Fund to medium-sized companies”. Not only. The Central Guarantee Fund can only be entered by companies with a rating higher than «B-». “The weakest – observes the credit manager of a bank – are destined to die if the perimeter is not extended”.