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Comment by fosk | Hacker News Reader

Italy is a country of 60M+ people and the 8th largest economy in the world, with a very high national debt and that significantly relies on tourism for its economy. Above and beyond the Coronavirus, this can terribly affect the long-term solvency of the country.

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I hope (and suspect) that the ECB (and Europe as a whole) will financially stand behind Italy, no questions asked (I'm a fellow European).

I am not European, but I hope EU can act jointly to handle this.

Otherwise, EU's future is jeopardy.

You seem to forget that the ECB is there for the banks, not for the people or their countries.

The financial stakeholders in these banks and in Europe as a whole have a powerful motivation to contain this pandemic.

You seem to forget that [ insert deeply ideological sloganeering / extremely arguable value judgment ].

I wish everyone was addressing trolling face on, like you. Thank you.

Yes, the ECB is there to support and regulate the banks, that is its job. There is a very good reason for this: if you don't have stable and healthy banks you don't have a functioning economy.

People of your ideological ilk see this as some sort of negative but it's absolutely vital. You may think of banks as evil and having a lot of money, but that money is not theirs but "the people's."

Many banks certainly don't tend to act like it is the people's money.

The ECB can (and has in the past) given out cheap money under the condition that this is used for loans. They could do that again easily.

Loans to companies to buy back their own stock. XD

What happens when France and Germany and Spain reach Italy totals? Who will be left to help out?

Good question, I'm thinking that the EU (because at that point this will have become a political issue) will have to put all its geo-political weight to good use and force a debt moratorium, I don't think that just plain old QE (or whatever else they'll decide to call it) will work anymore. That could at least relieve some pressure off Italy, which has one of the highest debts to service from the OECD group.

I believe Turkey is sending people to help...

The ECB, of course. It can create an unlimited money and use it to support the stability of banks that are the largest holders of sovereign debt. It's done this before and it will do it again.

A full-scale failiure of the Italian economy and/or failing of any major Italian bank is "game over" for the Euro. The Greece bailout already had the Eurozone down on its knees, but this is a different dimension.

Allow me to doubt this until I see it become reality. The European government has been less than helpful to Italy throughout its history.

As the EU is mostly only its parts and everyone now in alert, I highly doubt it. Everyone is keeping their medical items to themselves now, because there is not even sufficient for their own country. EU will mostly be talk.

They are mostly talk because the EU has little actual power. Giving debt relief to Italy has to be decided by head of states. I'm pretty certain that there's a lot of public support across the EU to help Italy if they need to. If Italy cannot refinance, issuing debt backed by several countries would be an easy option. You wouldn't even need support by all EU countries, Germany, Netherlands, Belgium and France backing it would be more than enough. And those would certainly be sympathetic to do that, a collapsing Euro would hit all of those states harder.

But so far, debt markets are still open and there's no reason to panic. Therefore governments focus on more pressing problems for now.

National debt is merely a number's game. ECB can simply eat it. They are suffering from deflation after all and they could use some inflationary move. Debt accounting for the national governments is there to enforce financial discipline in normal times. Right now it is much more akin to war time. Evenly distributing the pain through bond and currency holders will be seen as just compared to the lives that can be saved through decisive actions.

National debt may be a numbers game, but it's not merely that.

There's nothing simple about any ECB decision on monetary policy, and the composition of the EU when combined with the nature of the Euro is such that pain almost by definition can't be evenly distributed.

ECB already implicitly backs every country's bonds. They just need to stick to their stance. After the crisis is over there will be time to work out the cost sharing among European countries.

That is a completely hollow guarantee, though.

The ECB's balance sheets are bad enough as it is, and one country's "cost sharing" is another country's forced-austerity to bail out another country's bad loans.

The Eurosystem has serious issues that are about to get even worse. The ECB is practically insolvent by their own standards, and would be technically insolvent by American standards.

Fully agreed, this is a big concern of mine as well. We've got a 2 week trip planned to Italy in May, but that is likely to get cancelled this week based on the growing concerns throughout the country. I am fully expecting to reschedule our same trip later in the year, but until the virus starts to slow down significantly, I'm not comfortable rebooking.

have a trip scheduled first 2 weeks in june, also unsure of what to do

We had a cutoff-date approaching for refundability of one of our bookings, otherwise we would have waited to see what happens over the next few weeks.

If you can afford to wait, I'd ride it out a bit longer.

My gut feeling from Italy: May, difficult. June, maybe.

But expect that this disease expands to almost everywhere so what's going to be the status of your country by then, regardless where you are from? I'm not expecting to be able to travel much this summer, not because I'm from Italy but because every country is going to have its own share of problems.

Thoughts on the UK? I'm supposed to go on a vacation to England for a week starting April 1st

You might as well roll some dice at this point - going to be as reliable for advice.

The plane flight/airport will be the biggest risk.

I live in the UK and have no idea. It's quite likely that we delay quarantine until too late, but when that actually is or how bad is anyone's guess.

Even if the flight isn't canceled, that's going to be a pretty unpleasant vacation. Make contingency plans and expect that there will be a change fee waiver for you to rebook your trip to later.

I'm supposed to start a short contract there end of March, and I'm considering cancelling. UK seems to be <del>4-6 weeks</del>(EDIT: 2-3 weeks) behind Italy now, and I don't want to get stuck in a different country than the rest of my family, without even an insurance number (apparently, it takes more than a month to acquire one; end of April, I'm betting the country will be in total lockdown).

The UK is only two weeks behind Italy. Look at the numbers.

https://en.wikipedia.org/wiki/2020_coronavirus_outbreak_in_I...

https://en.wikipedia.org/wiki/2020_coronavirus_outbreak_in_t...

You're right; mental brain fart on my end (I was thinking of doublings, but I wrote weeks).

> May, difficult

I have an interest in this (I booked a business trip to Italy end of May / beginning of June), but my gut feeling is that the country will not stand for two months of complete lockdown. Two weeks, sure; a month, probably; two months is a very long time to keep so many things on hold. Italy is not China.

I expect some measures will stay in place (particularly about large gatherings), but not all.

I have been thinking about this for a week while monitoring travel alerts. I have two business trips scheduled—-one in May and the other in June. My employer just canceled my May trip today and I feel that the same is going to happen for June. While I can always reschedule, I fear that my colleagues and friends in Italy, whose families depend on visitors during the months of May and June, will not recover from this.

Living in Milan.

Given the nature of this outbreak the real issue is not 'when' it is gonna happen anywhere else, but 'when'.

Italy has been hit first and I must say the reaction of the regions has been uneven, but in the future if the virus doesn't stop with the warmer weather, maybe your country is gonna keep people from flying abroad, so I think it's very difficult to make proper plans right now and, as far as tourism is concerned, 2020 is gone.

Mid-April. But booked well before it got crazy. Looks like I'll be SoL unless the US places full travel restrictions.

Had one end of March. Booked well before COVID-19 was a thing, paid for before it was in Europe. Already cancelled, now we're fighting with the travel agency to waive the cancellation fee.

I would not worry, past governments have already terribly affected the long-term solvency of the country.

It seems a little silly to talk about how some particular instance of desperate measures will effect some particular polity, without considering the context of that these measures and the devastation that's tied to them will be present absolutely everywhere within 1-2 months.

I guess this will be the final straw. The whole planet has to assemble and invent a plan to smooth out the bubble.

The ripple effect of potential Italian bank defaults will ripple throughout the EU and the USA as well.

The ripple effect is already in place. Flybe airline just defaulted, I've read a post on Linkedin that a small catering firm is suffering in Hungary due to cancelled events and other companies in the food chain will probably suffer a lot more especially if they operate with a razor thin margin.

After the human factor, the virus will hit the economy hard. It's probably only a matter of time till it triggers a serious recession. I'd really like to be wrong here.

> Flybe airline just defaulted

Although they tried to blame this on Coronavirus that's a small part of it most likely. They nearly folded a few months ago and the government promised them massive tax subsidies which it appears they never followed through on. Regardless my point is that Flybe collapsing his little to nothing to do with Coronavirus. It just accelerated things ever so slightly.

I agree - Flybe is the British Alitalia, they would have cracked at the first crisis anyway. Still, I'm happy to bet that, by June, they will not be the only airline to have folded.

Most national flagship carriers will get bailed out, you can bet on that.

Is this something British people support? Or just something you see as inevitable?

Inevitable. At least in the US, the govt will certainly act to preserve the big 3.

Since beginning of March, Switzerland has 2.5k workers on part-time unemployment (a setup to use reduced working time instead of layoffs).

What is that about? Half of the Swiss work force?

Ripple effect has hardly started. It's v0.1, expect the ripples from China's Dec shutdown to hit late Q1 and throughout all of Q2, if not longer.

If the ECB forbears they can in turn forbear with their own customers. That is the only sane thing to do. This is not the banks' doing and they don't need to be disciplined at this particular moment.

You would be right; Italy's private savings are in the ballpark of $10T+, which means a "patrimoniale" (tax on wealth) would be the last resort to avoid bankrupcy.

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