Italy will boost measures to soften the economic impact of the coronavirus such as suspending the need to pay household bills, the industry minister said on Tuesday, calling for the European Union to change its rules to allow more government spending.

The whole of Italy, Europe’s worst-affected country, is under lockdown until next month in an unprecedented attempt to beat the epidemic. With the country already on the brink of recession, the government steps come at a huge cost for the euro zone’s third-largest economy and have alarmed financial markets.

The gap between Italian and benchmark German 10-year bond yields jumped above 200 basis points on Monday for the first time since August 2019.

Industry minister Stefano Patuanelli said the government would approve measures worth around €10 billion to help companies and families, telling Radio Capital this would probably cause the budget deficit to rise to just under 3 per cent of national output this year.

Economy minister Roberto Gualtieri wrote to the European Commission last week to say Rome planned to raise the current 2.2 per cent official target to 2.5 per cent. A government source told Reuters on Monday the Italian treasury was considering lifting it to 2.8 per cent.

With the economy now widely expected to fall into deep recession, further upward revisions seem possible.

Mr Patuanelli said that among a first batch of measures, the government planned to suspend payments of bills, taxes and mortgages in order to ease pressure on small firms and households. Other steps would come later, he added.

The cabinet is due to meet on Wednesday to approve the initial package.

The minister called on the European Union to change its Stability Pact and Fiscal Compact public finance rules once the emergency linked to the coronavirus had settled, saying the economic toll would hit many people.

“We will ask for the rules to be changed. It a necessary condition, otherwise people will die,” Mr Patuanelli said, adding it was “not a matter of ‘if’ the rules will be challenged but how they will.” – Reuters