A new tsunami of bad debts washes ashore while banks are still struggling with the debris from the prior tsunami of bad debts.
By Nick Corbishley and cross-posted from WOLF STREET:
Over half of Italian companies reported facing a liquidity shortfall by the end of 2020 and 38% reported “operational and sustainability risks,” according to a survey of 90,000 companies conducted by the Italy’s national statistics institute ISTAT.
The national Italian business lobby, Confcommercio, recently estimated that 60% of restaurants and other businesses were short on liquidity and 30% had complained about the extra costs of implementing anti-contagion safety measures so they can start serving customers after lockdown.
The tourism industry, which accounts for 13% of GDP and has been crucial in keeping Italy’s economy afloat over the past decade, providing jobs for an estimated 4.2 million people, is in post-lockdown limbo. The borders have opened but foreign tourists still remain elusive. And with many local residents in no financial position to go on holiday this year, domestic demand is unlikely to pick up as much of the slack as tourism businesses are desperately hoping.
Tourism was one of the few parts of the economy that has been growing in recent years. Last year, for instance, it grew by 2.8% while Italy’s industrial output shrank by 2.4%. In an economy that hasn’t grown for well over 10 years while public debt continues to grow at a frightening rate, its fastest growing sector has just been hit with the mother of all sledgehammers…