LONDON (CNN BUSINESS)- Already in debt pre-corona, Italy is pushed into the debt trench even deeper post pandemic. And surprisingly it’s still able to borrow money for free.
Italy, being the next in line after Greece for indebt, issued a bond that discloses an agreement for three years on zero interest. Very few countries in the world have a back up from their government in rebuilding the damage incurred by the pandemic.
Despite of trillions being already invested, economies are still endeavoring to cope with the loss incurred by the first attack of the virus; huge financial support is provided to the impoverished business, particularly after the second wave of the infection.
The International Monetary Fund, known for supporting the governments in tough situations has warned against the withdrawal of the aid soon.” Preventing further setbacks will require that policy support is not prematurely withdrawn” Chief Economist Gita Gopinath said on Tuesday.
In the month of April Italy sold its older bonds at low rates, despite the depreciating graph presented by Fitch Ratings, in the hope of benefits. The IMF expects Italy’s economy to fall by 10.6% this year and predicts the government debts to exceed 160% GDP by end of 2020.
Italy’s ability to raise debts with cheap strategies signifies how pioneering arbitration by central banks have bridged a gap between financial markets and the real economy.
“We are still in the midst of a global pandemic,(yet) Italy can fund itself for free,” said head of rates strategy at Rabobank Richard McGuire.’
Italy is also deemed to receive a sum of € 750 billion by the European Union as post-pandemic recovery fund. The country will also receive € 86.6 billion from the fund, according to Berenberg Chief Economist Holger Schmieding.
“Thanks to the prospect that money will flow eventually, even fiscally challenged member states can now borrow at extremely favorable terms on markets.” He said to clients on Wednesday.