Via Financial Times

Emergency doctors in Italy, the European epicentre of the coronavirus pandemic, were this week given guidance on “catastrophe medicine”. As the number of patients requiring intensive care balloons and hospitals run out of intensive care beds, doctors were instructed to “aim to guarantee intensive treatment to patients with the greatest chance of therapeutic success”.

With the grim task of selecting patients unlikely to survive, Italy’s health authorities have pleaded with the countries’ friends and allies for emergency supplies. On Thursday, they finally arrived — from Shanghai. The China Eastern flight brought a medical team and 31 tonnes of supplies including ventilators.

Beijing’s gesture has reinforced a perceived lack of support from Europe, compounded by a communications blunder by the European Central Bank president Christine Lagarde, who implied on Thursday it was no longer her job to keep Italy in the euro.

When Italy asked for urgent medical supplies under a special European crisis mechanism no EU country responded. Fearful of its own shortages, Germany initially banned the export of medical masks and other protective gear. 3M, a producer, said the German restrictions had made it impossible to supply the Italian market. Berlin subsequently relaxed the export rules, but then Austria closed its borders to people arriving from Italy unless they could prove they were virus-free.

The rebuffs are nourishing resentment that Italy has been abandoned by its European friends. It is a perception that has taken root over a decade, of a currency union that lacks collective solidarity and stifles growth as Italy confronted migrant flows from Africa and the Middle East. This, in turn, has fuelled the rise of Eurosceptic nationalists such as far-right firebrand Matteo Salvini.

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“It is back to the future, where Italy is left on its own,” said Nathalie Tocci, director of the Institute for International Affairs in Rome. “It was the case with the eurozone crisis, then the migrant crisis of 2015-16 and now the coronavirus crisis. It is the same old story and the political implications could be massive.”

In this photo released by China's Xinhua News Agency, members of a Chinese aid team arrive at Fiumicino Airport in Rome, late Thursday, March 12, 2020. According to Chinese state media, a charter plane carrying members of a medical team and several tons of medical supplies from China arrived in Rome to assist Italy in fighting the coronavirus outbreak. For most people, the new coronavirus causes only mild or moderate symptoms. For some it can cause more severe illness. (Cheng Tingting/Xinhua via AP)
Medical supplies arrive in Rome from China on Thursday to help Italy counter the deadly disease © AP

As Rome’s anger mounted this week, Ursula von der Leyen, the European Commission president, tried to reassure Italians the EU was on their side, promising flexibility over EU deficit rules and a €25bn investment fund for fighting the crisis across the bloc. But the warm words from Brussels were soon drowned out by a message from Frankfurt.

Christine Lagarde’s comment that it was not the ECB’s job to “close the spreads” between 10-year Italian government bonds and German Bunds — a measure of the risk differential between the two sovereign debts — caused it to spike by 60 basis points, the biggest daily increase on record. The FTSE MIB, Milan’s blue-chip stock index, plummeted 17 per cent, its biggest daily drop, out-slumping other equity markets on a terrible day for investors around the world.

“Italy needed help and it has been given a slap in the face,” said Matteo Salvini, leader of the nationalist League party who said he would look into seeking compensation from the central bank.

He added: “The only help that has come from Europe has been to cause the collapse of the stock market and to make the spread go crazy. Yesterday Italy lost €68bn of savings.”

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Medical staff in protective suits treat coronavirus patients in an intensive care unit at the Cremona hospital in northern Italy, in this still image taken from a video, March 5, 2020. Picture taken March 5, 2020. LA7 PIAZZAPULITA/Reuters TV via REUTERS ATTENTION EDITORS - ITALY OUT. NO COMMERCIAL OR EDITORIAL SALES IN ITALY AND .IT WEBSITES. THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. NO ARCHIVE. NO RESALES. DO NOT OBSCURE LOGO. PIXELLATIONS FROM SOURCE. THIS PICTURE WAS PROCESSED BY REUTERS TO ENHANCE QUALITY. AN UNPROCESSED VERSION HAS BEEN PROVIDED SEPARATELY.
Medical staff in protective suits treat coronavirus patients in an intensive care unit at Cremona hospital in northern Italy © PIAZZAPULITA/Reuters TV

Giorgia Meloni, leader of the far-right Brothers of Italy party, attacked Ms Lagarde as an “evidently inadequate” ECB president.

“In 2012 faced with an economic crisis the Italian Mario Draghi used a bazooka to calm it,” she said. “Today his French successor Christine Lagarde decided to use a boomerang, with a surreal statement that caused the collapse of the stock market.”

Hours after Ms Lagarde spoke — the ECB a day later insisted it “stood ready to do more” — Sergio Mattarella, Italy’s president, unusually spoke out to say that a country in crisis expected “initiatives of solidarity and not obstacles to action”.

“The job of the central bank should not be to hinder but to help such measures by creating favourable financial conditions for them,” said prime minister Giuseppe Conte.

The spike in the spread — a popular metric in Italy since the eurozone debt crisis — reinforced a narrative that when a crisis hits, the country is on its own.

Mandatory Credit: Photo by ARMANDO BABANI/EPA-EFE/Shutterstock (10580965a) European Central Bank (ECB) President Christine Lagarde speaks during a press conference following the meeting of the Governing Council of the European Central Bank in Frankfurt am Main, Germany, 12 March 2020. Press conference on ECB Governing Council, Frankfurt Am Main, Germany - 12 Mar 2020
Christine Lagarde, ECB president, implied on Thursday it was no longer her job to keep Italy in the euro © ARMANDO BABANI/EPA-EFE/Shutterstock

Ms Lagarde’s comments appeared to undo the work of her Italian predecessor, Mario Draghi, who was instrumental in restoring confidence that Italy could remain in the eurozone, while echoing the sentiments of hawkish German policymakers, said Ms Tocci.

It did not help that Ms Lagarde’s explosive remarks about “lo spread” — as the Italians call it — won approval from Jens Weidmann, president of Germany’s Bundesbank.

The EU could yet put in place a co-ordinated rescue package for Italy, including Italian bond-buying by the ECB.

But Ms Lagarde’s comments had exposed “an underlying vulnerability in the eurozone centred on Italy’s precarious economic position”, said Kenneth Wattret, chief European economist at IHS Markit. To fix the economic damage of the severe travel disruptions and quarantine restrictions would require the ECB to monetise Italy’s debt or a bailout, he said.

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“It is the elephant in the room and this crisis is bringing it home because Italy is now at the heart of the crisis in Europe,” Mr Wattret added.