More than one hundred thousand companies were saved from the crisis caused by the first lockdown thanks to public aid: At the end of 2020, thanks to the government measures approved between March and August, the number of companies in liquidity deficit would have been reduced from 142,000 to about 32,000, while the overall requirement would have dropped from 48 to 17 billion. This was stated by the head of the Financial Stability Service of the Bank of Italy, Alessio De Vincenzo, at a hearing before the Finance Committee in the Chamber. The analysis refers to an estimate made by Palazzo Koch on over 700,000 joint stock companies. The support measures would also have made it possible to reduce the incidence of capital companies with a capital deficit (with net assets below the legal limits) from 14 to 12%, compared to 7% prior to the crisis, he added.

Serious risks of imbalance in businesses

The Bank of Italy numbers show how dramatic the impact of the pandemic would have been if the government measures and aid from Europe had not arrived, which eliminated the constraint on the use of public debt. However, the picture is not rosy: there is a serious risk that the shock caused by the Covid-19 pandemic will cause a serious imbalance in the financial structure of Italian companies, continues De Vincenzo. The economic and social consequences of the spread of the virus and the measures adopted to contain it have led to heavy drops in turnover and profitability, increases in indebtedness, and erosion of the capital bases of companies.

Maintain moratoriums to avoid bankruptcies

For this reason, the Bank of Italy The conditions are not yet in place to initiate an exit from this phase of broad public support for the production sector as the uncertainty on the economic prospects remains high, although the start of the vaccination campaign bodes well. There is a need – added De Vincenzo – to intervene to ensure that as many companies as possible are able to overcome the crisis, returning to operate in better conditions than in the past.

Gradually reduce aid

Attention, then: the review of the measures adopted to favor credit in the Covid crisis (moratorium and loan guarantee) must be gradual in order to allow companies with temporary financial problems but with recovery prospects to continue operating in the medium term and to avoid bankruptcies concentrated in a short time span may have a depressive impact on aggregate demand. One solution could be a return of the SME Guarantee Fund to normal coverage levels, lower than the current ones, or a low cost can be assumed to access the public guarantee. According to the representative of the Bank of Italy, the latter would allow a self-selection of credit by the same companies: only those who believe they are able to return to profitability would use it.

Do not miss the opportunity of the Next Generation Eu to strengthen businesses

There is now an opportunity not to be missed: Acting today, also taking advantage of the opportunity offered by the resources available under the European Next Generation Eu program, to facilitate capitalization, raising capital directly on the markets, diversification as much as possible sources of financing and, when needed, rapid and effective restructuring processes will certainly help companies to make the most of the economic recovery phase as soon as it arises.

The street of the Stock Exchange

One of the streets is the Stock Exchange. In Italy there are about two thousand medium and small enterprises – which in total the Bank of Italy estimates at a value of about 70 billion euros – with characteristics suitable for listing on the AIM market despite the black year of the pandemic, explained De Vincenzo. It would be a step in the right direction and would reduce the gap with other European countries.

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