Wednesday, March 11, 2020

Making the banks pay for the pandemic

Italy is now under full lockdown due to the pandemic. And the Italian government has announced an interesting economic stimulus policy to help people when they're unable to work: suspending mortgage payments:

Payments on mortgages are to be suspended in Italy due to the coronavirus outbreak, the country’s government has announced.


When asked about the possibility of halting mortgage payments on Radio Anch’io, Laura Castelli, the deputy economy minister, said: ”Yes, that will be the case, for individuals and households.”

I'm not sure about home ownership rates in Italy, or whether they have a similar plan to suspend rents, but the intention is clear: make the banks, rather than people, pay for the pandemic. Of course, they'll get their money eventually - the important term is "suspended", not cancelled, and it effectively just extends the mortgage term - but it means they'll effectively be providing a giant loan to the public for the duration of the crisis. Its not a complete solution - obviously, it does nothing for renters - but its an partial one, and one which puts costs where they can be best handled. Sadly, the New Zealand government is unlikely to do anything of the sort.