UPDATE 2-Italy says EU flexibility can help if coronavirus hits growth

Italy may need to call on the European Union to offer leeway on its budget targets as it struggles with the impact of the coronavirus outbreak on an economy already on the brink of recession, a senior official said on Tuesday. The comments from Deputy Economy Minister Laura Castelli came a day after Prime Minister Giuseppe Conte warned that the fallout from the outbreak, so far concentrated in the economic powerhouses of northern Italy would be "very strong".

Asked if Italy, which has one of the highest debt burdens in the eurozone and has long struggled to respect the bloc's strict borrowing rules, would request additional flexibility to help handle the impact of the coronavirus, she said there was scope for the EU to do so if needed. "There are resources that the EU can give us in relation to economic events that could lower GDP considerably. We hope we won't need it but it's a situation in which the EU should," Castelli told RAI radio.

Officials from the World Health Organization and the European Union were due to meet in Rome on Tuesday to discuss the crisis, which first broke out in China and has now spread to about 29 other countries and territories. Italy, the country in Europe worst affected, has reported more than 220 cases and seven deaths, mostly in Lombardy, the northern region that includes the financial capital Milan and Veneto. The two regions together account for about half of Italy's exports.

Even before the outbreak of the virus, which triggered a fall of more than 5% on the Milan bourse on Monday, Italy was teetering on the edge of recession, after the gross domestic product (GDP) fell 0.3% in the fourth quarter of 2019. The tourist industry, which accounts for about 13% of GDP, fears a plunge in bookings as the government has ordered a clampdown on public events including soccer matches, cinemas, and theatres.

Milan cathedral was closed to visitors, the Venice carnival, one of the world's premier tourist attractions, was shut early for the first time in decades and airlines began restricting flights to Italy. UK authorities on Tuesday advised British people who had visited northern Italy to self-isolate if they had any flu-like symptoms.

The sudden outbreak of the disease over the weekend triggered alarm in Milan, bringing a noticeable drop in the number of people in public places and prompting shoppers to rush to supermarkets to stock up on basics. Esselunga, one of the biggest supermarket chains in northern Italy, said it was capable of keeping branches fully stocked and that shoppers had no need to buy more than they would for their normal requirements.

Although the outbreak has so far largely been confined to northern Italy, there were signs it could spread. Authorities in the Sicilian city of Palermo said on Tuesday a tourist from the northern town of Bergamo had tested positive and been placed in quarantine pending further tests.

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