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Italy prepares new 40 billion euros economic stimulus package - source

·1-min read
FILE PHOTO: Outbreak of the coronavirus disease (COVID-19) in Milan

ROME (Reuters) - Italy's government is preparing a new stimulus package worth around 40 billion euros ($47.60 billion) to support its coronavirus-battered economy, a source close to the matter said on Monday.

The extra borrowing will probably push this year's budget deficit above 10% of gross domestic product (GDP), up from 9.5% in 2020 when the economy shrank by 8.9% as a result of the coronavirus curbs, a government source told Reuters last week.

The money will fund additional grants to businesses forced to close due to coronavirus restrictions and extend an existing debt moratorium for small and medium-sized companies, hard hit by the restrictions aimed at curbing the infections.

Rome's last official estimate, made by the previous government in January, envisages a deficit-to-GDP ratio of 8.8% this year. That was premised on an economic growth forecast of 6%, which officials say will have to be revised down to a figure between 4% and 5%.

The new stimulus will also increase Italy's huge public debt, equal to 155.6% at the end of 2020 and proportionally the second highest in the euro zone after Greece.

The last time Italy registered a double-digit deficit was in the early 1990s.

The new deficit and debt targets, along with multi-year GDP growth forecasts, will be issued in the Treasury's Economic and Financial Document, which is expected to be approved this week.

(Reporting by Giuseppe Fonte, writing by Angelo Amante, Editing by Rosalba O'Brien and Chizu Nomiyama)