Fiat-Chrysler's state-backed loan crucial for Italy's economy - Intesa CEO says

MILAN (Reuters) - A 6.3 billion euro state-backed loan for Fiat Chrysler (FCA) <FCHA.MI>, financed by Intesa Sanpaolo <ISP.MI>, is crucial in terms of safeguarding Italy's economy, the head of the country's biggest retail bank said.

The state-guaranteed loan has drawn criticism in Italy because FCA, which has moved its legal headquarters to the Netherlands, is working towards a merger with French carmaker PSA <PEUP.PA>.

Italy is set to provide guarantees on 80% of the loan through credit export agency SACE under an emergency liquidity package adopted to help companies weather the coronavirus crisis.

Speaking on Corriere TV, Intesa CEO Carlo Messina said the loan was essential to protect a sector which accounts for 6% of Italy's national output because, under the terms of the loan, FCA will use the money to pay employees and suppliers, as well as finance investments in the country.

"With this transaction we're supporting a key sector of the economy, its suppliers and employment," Messina said.

"It's a key plank (of efforts) to safeguard (the economy in) the current phase, if we don't support sectors which are crucial for GDP such as automotive and construction ... instead of a 10% GDP contraction we'll have a 15% drop," he said.

Messina said to ensure that conditions set for the loan were met the money would be disbursed through dedicated current accounts which would be used exclusively to pay staff, suppliers and to finance investments.

(Reporting by Valentina Za and Elvira Pollina; editing by Giulia Segreti and Jane Merriman)