By Elisa Anzolin and Gavin Jones

ROME/MILAN (Reuters) – Italy’s love affair with cash is fading. The coronavirus is turning Italians off notes and coins and the government is launching a raft of incentives to accelerate the trend, believing plastic payment can curb rampant tax evasion.

The Treasury estimates some 109 billion euros of tax is evaded annually, equal to about 21% of the revenue actually collected. The government believes the problem can be tackled by boosting digital payments which, unlike cash, leave a trace.

Prime Minister Giuseppe Conte is offering refunds on some money spent electronically, tax breaks for outlets with card machines and a new 50-million euro ($58.93 million) state lottery for card users only.

The coronavirus, which forced the government to lock down the economy between March and May, is helping his efforts.

“We have seen a surge in digital payments since the lockdown, I think mainly because of people not wanting to touch notes and coins,” says Cinzia Di Siena, who has run a pharmacy in southern Rome for the last 13 years.

A study published last week by credit association Assofin, market research firm Nomisma and pollster Ipsos said the lockdown was a “major occasion for Italians to try out non-cash payments,” with almost eight out of 10 making purchases online.

It reported that 31% of Italians increased their use of e-commerce during the lockdown, versus 23% of respondents in the United States, 18% in Germany and 16% in Britain.

Despite the recent trend, Italy is nowhere near the level of cashless purchases seen in much of northern Europe. European Central Bank data shows card payments in Italy last year accounted for 12.3% of GDP, versus a euro zone average of 16.6%.

CASH PRICE OR CARD PRICE?

Many Italian market stalls and taxi drivers will

(Bloomberg) — European aid money will help lift Italy’s economy out of a chronic underperformance if it’s targeted properly, according to the country’s minister in charge of industrial policy.

“I am convinced that Recovery Fund money will allow Italy to finally make the leap,” Economic Development Minister Stefano Patuanelli said in an interview in Rome Thursday. Italy will be the biggest beneficiary of the aid, and could receive up to 209 billion euros ($246 billion) in grants and loans.

But Patuanelli acknowledged the challenge of directing the money properly. Prime Minister Giuseppe Conte’s government will have to make tough political decisions, even at the expense of angering some supporters, so that it helps the post-coronavirus reconstruction and gives a much needed boost to long-term growth prospects.

“We need to have the strength to avoid distributing it in bits and pieces and instead concentrate it where it’s most effective to boost growth,” Pataunelli said. “We need credible projects and rapid execution to repair fractures in our productive system.”



chart, histogram: Italy's economic growth has long lagged behind the euro region


© Bloomberg
Italy’s economic growth has long lagged behind the euro region

The country has approved 100 billion euros in stimulus so far, which is set to boost its debt load to almost 160% of output. The economy will contract 9% this year and bounce back 6% next year, according to government forecasts.

Patuanelli said the only way out of the crisis is growth, and his ministry is working on identifying projects and sectors to submit to the EU. Among its targets are infrastructure, digitalization and green transition.

“The money shouldn’t be spent, it should be invested,” he said.

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By Giuseppe Fonte and Gavin Jones

ROME, Sept 29 (Reuters)Italy forecasts that its economy will contract by 9.0% this year, the Treasury said on Tuesday, while the budget deficit will come in at 10.8% of gross domestic product.

The 9% GDP contraction is a downward revision from a target of -8% set in April, while the 10.8% deficit now expected is a reduction from a goal of 11.9% set just last month.

The new targets were agreed at a meeting of the ruling parties on Tuesday, the Treasury said in a statement, and will be formalised in the government’s Economic and Financial Document (DEF) to be approved by the cabinet this week.

The DEF will be sent to the European Commission for approval and form the framework for Rome’s 2021 budget to be presented next month.

The coalition, led by the anti-establishment 5-Star Movement and the centre-left Democratic Party (PD), has been adjusting its economic and public finance targets since Italy was struck hard by the coronavirus pandemic in late February.

The DEF will target growth to rebound to a positive 6.0% next year, when the budget deficit will decline to 7.0% of GDP, the Treasury said.

The 7% deficit next year is a hike compared with a 5.7% target set in April, reflecting extra spending pencilled in by the government to help shake off its steepest recession since World War Two.

Expansionary measures in 2021, financed by extra borrowing and money from the EU’s Recovery Fund to help countries hardest-hit by COVID-19, will total some 40 billion euros ($47 billion), Economy Minister Roberto Gualtieri said in a televised interview on Tuesday.

Italy’s public debt, proportionally the highest in the euro zone after Greece’s, will be targeted at 158.0% of GDP this year, up marginally from 157.6%