The Washington Post - 13.03.2020

A22 eZ re the washington post.friday, march 13 , 2020

The coronavirus outbreak

BY DAVID J. LYNCH

If the novel coronavirus causes a new global financial crisis, it may start with an Italian bank. Already, Italy’s economy has been brought to an abrupt halt by the nationwide quarantine officials imposed earlier this week in hopes of arresting the worst outbreak of covid-19, the disease caused by the virus, outside of China. With more than 12,000 coronavirus cases, the Italian government tightened its lockdown this week, announcing that all stores, except f or pharmacies and grocer- ies, will be required to close. As commercial activity ceases in the world’s eighth-largest economy, the risk of a broader contagion may turn o n how well Italy’s b anks — long regarded as Europe’s weakest — withstand the test. Cash-strapped businesses and households may stop repaying their bank loans. At the same time, the government bonds that make up a big chunk of bank assets may lose value as rome’s costly anti-crisis spending spooks investors. That would erode banks’ capital reserves and crimp their lending, further slowing the economy. on Thursday, the European Central Bank announced in frankfurt measures designed to bolster Europe’s slow-growing economy against the debilitating effects of the virus. ECB President Christine Lagarde warned the union’s political leaders on a conference call this week that they would face a 2008-style financial crisis if they failed to launch coor- dinated actions. The ECB said it would increase its bond purchases by 120 billion euros through the end of this year and approved a new lending pro- gram for banks d esigned t o funnel cheap money to European businesses. The ECB surprised investors by opting not to further cut interest rates. At a news conference following the meeting, Lagarde said the ECB would “use all the t ools available” to combat the worsening economic outlook. And she called for countries that use the euro to launch “ambitious and collective” spending programs to boost growth, saying that governments’ fiscal efforts should be the “first and foremost” r esponse t o the crisis. “It is clear the economies of the world and certainly the econo-

mies of the euro area are facing a major shock,” s he said. The high-level ECB meeting came as worries about Italian banks a re becoming evident. Since mid-february, the interest rate or yield that Italy pays on its government bonds has risen even as countries such a s the Unit- ed States and Germany have seen their borrowing costs fall. Like- wise, investors now must pay twice as much to insure their government securities against a potential Italian default. As I taly’s s tock market f ell more than other European exchanges, Italian bank stocks were among the biggest casualties. Shares of UniCredit, the nation’s largest bank, plunged over the past month by 39 percent. Some analysts now worry about a “doom loop” where doubts about the fi- nances of Italy’s government and banks feed on each other in a vicious circle. “It’s a pretty significant down- side risk,” s aid Neil Shearing, chief economist for Capital Economics in London. “It’s easy to see things unravel quickly if the shock to the economy i s bigger than expected.” most analysts do not yet antici- pate the virus leading to the sort of global financial tumult that shaved $15 trillion off Americans’ net worth in the 2008-09 crisis. Global banks a re healthier, h aving been forced by regulators in the United States and Europe to hold more capital in reserve and to refrain from some of the riskiest practices that fueled the housing bubble. But dangers lurk in some cor- ners of the industry. China over the past year has witnessed a number of bank closures and de- positor runs. With the country’s economy slowing sharply, an ac- cumulation of nonperforming loans c ould become a bigger head- ache. Long regarded as Europe’s weakest financial institutions, It- aly’s banks have thinner capital cushions than the average conti- nental bank and hold more than twice as many bad loans. The banks as a whole own about one- quarter of Italy’s $2.4 trillion out- standing government debt, link- ing the fate of the country’s financial institutions and its government in a way that could prove destabilizing in a sharp down- turn. Italian authorities also may be less capable of managing a sud- den banking crisis than their counterparts in China, where the government and the banking system both answer to the Commu- nist Party. That’s one reason Shearing calls Italian banks “the weakest link in the global chain.” The Italian e conomy has disap- pointed for years. In real or infla-

tion-adjusted terms, the average Italian earns no more today than 20 years ago. The economy stag- nated last year and is expected to shrink by 2 percent this year, according to Shearing. Italian Prime minister Giuseppe Conte said this week t he government would allocate 25 billion euros (more than $28 billion) to bolster the ecoomy from the escalating toll — more than three times the sum set aside just one week ago. Last w eek, the European Union approved Italy’s spending plans, which violated the union’s bud- getary rules for countries that use the euro. That move came less than three months after Brussels chided Italian officials for their profligate ways. The Italian government says it plans a mortgage payment holi- day, w hich should help businesses and consumers, although it may require public aid to make up the loss to banks. B ut officials have yet to provide details. As it hikes spending to offset the economic slowdown, Italy’s debt — at 135 percent of gross domestic product, second only to Japan among major economies — is certain to rise. Ashoka mody, a former Inter- national monetary fund official who designed the 2009 international bailout of Ireland’s b anking system, said investors will push up Italy’s borrowing costs and precipitate a debt crisis over the next several months. In its annual review of the Ital- ian economy, t he Imf warned l ast year that an Italian crisis would inevitably spread. “Spillovers from heightened stress in Italy would be global and significant,” the fund said, adding that “acute stress in Italy could push global markets into uncharted territory.” If Italy were downgraded to junk status — which the fund said would be “unprecedented” f or an advanced economy — losses would spread through financial markets. Banks in france, Spain, Portugal and Belgium all hold substantial amounts of Italian government debt, according to the fund. To head that off, Italy will need a financial rescue that could cost 700 billion euros (roughly $800 billion), mody said. And ECB, Imf and U.S. Treasury officials should act before the situation worsens. “The international community has to come with bags of money,” said mody, now an economics pro- fessor at Princeton University. “[The Italians] are dealing with a humanitarian crisis. But the fact of dealing with a humanitarian crisis is going to create a financial crisis.” [email protected]

Where would a fiscal crisis begin?

Covid-19 lockdown has abruptly halted Europe’s weakest economy — Italy

BY ERIN CUNNINGHAM AND DALTON BENNETT

ISTANBUL — Two days after Iran
declared its first cases of the novel
coronavirus — in what would
become one of the largest out-
breaks of the illness outside of
China — evidence of unusual ac-
tivity appeared at a cemetery near
where the infections emerged.
At the Behesht-e masoumeh
complex in Qom, about 80 miles
south of Te hran, the excavation of
a new section of the graveyard
began as early as feb. 21, satellite
images show, and rapidly expand-
ed as the virus spread. By the end
of the month, two large trenches
— their lengths totaling 100 yards
— were visible at the site from
space.
According to expert analysis,
video testimony and official state-
ments, the graves were dug to
accommodate the rising number
of virus victims in Qom.
Iran, a nation of about 80 mil-
lion people, has suffered a partic-
ularly deadly surge of coronavirus
infections, including among its
top leadership. Iran’s Health min-
istry says that 429 people have
died of the virus, which causes the
disease known as covid-19, and
more than 10,000 have fallen ill.
Among the dead are members of
parliament, a former diplomat
and even a senior adviser to the
Supreme Leader. At least two doz-
en other officials, including a vice
president, have been infected.
In Qom, the spiritual center of
Iran’s ruling Shiite clerics, more
than 846 people have contracted
the virus, officials say. Iran’s gov-

ernment has not released an official death toll for Qom, however, where about 1.2 million people live. But videos, satellite images and other open-source data from the cemetery — a vast complex six miles north of the city center — suggest t hat the number of people struck down by the virus there is significantly higher than the official figure.

A senior imagery analyst at maxar Te chnologies in Colorado said the size of the trenches and the speed with which they were excavated together mark a clear departure from past burial practices involving individual and family plots at the site. In addi- tion to satellite imagery, videos posted on social media from the cemetery show the extended rows

of graves at Behesht-e masoumeh and say they are meant for coronavirus victims. The imagery analyst, who re- quested anonymity because of the sensitivity of his work, also pointed to an image showing what appears to be a large white pile of lime, which can be used to man- age decay and odor in mass graves. Iranian health officials

have in recent weeks confirmed the use of lime when burying coronavirus victims. In a video, shared by the BBC’s Persian service march 3, the narrator describes the scene at Beh - esht-e masoumeh cemetery as men carry a casket toward a trench with multiple graves. Qom, like other parts of Iran, is grappling with the coronavirus

outbreak that has overwhelmed the public health infrastructure. “This is the section for coronavirus victims,” t he narrator says, as the camera pans across a small portion of the trench, showing mounds of dirt and small, simple markers. People wearing blue protective suits are seen standing nearby. “more than 80 [people] have been buried in this section so far, and they say only 34 de aths,” he says, citing the official death toll on feb. 28. fabian Hinz of the middlebury Institute of International Studies, who reviewed this and a second video, said that unique geograph- ical markers in the videos match landmarks found near the cemetery. In the second video, another narrator says that he is at the Behesht-e masoumeh cemetery on march 3, about two weeks after Iran reported its first cases. By that time, at least 77 people had died of the virus, according to official figures, and more than 2,000 people were infected, though information from Te hran hospitals reviewed by The Wash- ington Post strongly suggests the outbreak is far larger. “A worker told me that they must have buried more than 250 coronavirus victims so far,” the caption reads. As the narrator walks across the cemetery grounds, he points the camera down to highlight what he says are new burials. “These are all graves and they are fresh,” he says, at one point using a gloved index finger to direct the viewer to the plots on the horizon. “These are all from the last few days,” he continues. “A nd as you can see, it goes on until the end.” [email protected] [email protected]

Bennett reported from Washington.

Massive burial pits suggest a more dire situation in Iran

Maxar technologies images and other data from the cemetery in Qom, iran, suggest that the virus death toll there is significantly higher than the official figure.

Satellite images show

newly excavated trenches

as long as football fields

“It’s as if you were asking what
to do if an atomic bomb explodes,”
said Pesenti, the head of Lom-
bardy’s intensive crisis care unit.
“You declare defeat. We’ll try to
salvage what is salvageable.”
The uncontained eruption of
coronavirus cases in northern Ita-
ly has pushed this country’s
wealthiest r egion within inches of
a health-care system collapse,
while offering a warning to the
rest of the world against waiting
too long to control an outbreak.
Lombardy, home to Italy’s fi-
nancial hub of milan, boasts a
health-care system as proficient
as any in Western Europe. Its facil-
ities have clung on through three
weeks of galloping case growth by
delaying surgeries, stopping HIV
treatments, converting regular
hospital space i nto covid-19 units,
and depending on exhausted doc-
tors and nurses — some of whom
are becoming sick themselves.
But it can’t keep up for much
longer, with cascading implica-
tions for Italy’s ability to combat
the virus. Already, the region has
4,200 coronavirus patients in
need of hospitalization; Pesenti
projected that over the next two
weeks, that number could grow
nearly fivefold, to 20,000. As
many as 3,000 or 4,000 of them
would require intensive care.
Lombardy has just 737 inten-
sive-care beds available for coro-
navirus patients. more than 600
are filled.
“It would be an impossible situ-
ation,” Pesenti said.
The region is racing to bring
more beds online; it added 127 on
Thursday.
Giulio Gallera, Lombardy’s
health chief, said Thursday that
the region would reach its capacity
in “five, six or seven days,” even if it
tried to add more beds in hospital
“cellars.” I n an interview with Ita-
ly’s La7 channel, Gallera described
the possibility o f adding 500 inten-
sive-care beds at milan’s expo cen-
ter, the kind of rapidly assembled
zone that China created in the
hard-hit Wuhan area.
“It would be very important,”
Gallera said.
Lombardy’s health system has
become something of a compass
guiding the entire country. A s it has
come under increasing pressure in
recent days, Prime minister
Giuseppe Conte has raced to set
ever more stringent nationwide
measures, leading Wednesday to a

italy from a1

Hospitals

in Italy face

more cases

than beds

Giovanni rezza, the director of the infectious-disease department at Italy’s National Institute of Health, said hospitals had not yet faced the challenge of being unable to treat patients, or having to choose which patients get lifesaving care and which don’t. “Up until now, everybody is being ventilated,” rezza said. If hospitals run out of capacity, he said, decisions will be made based on life expectancy. “for us, it’s really scary and unacceptable to do this kind of selection,” he said. The hospital in Bergamo, a virus hotspot, is widely considered to be one of the most overburdened in the Lombardy region. Luca Lorini, the head of its emergency and criti- cal care department, said it had not yet been forced to pick some patients over others. “But with this pace, we have but a few days ahead of us” until that happens, he said. Italy is receiving supplies from China, which has pledged to send 20,000 protective suits for medical workers and 10,000 ventilators. It- aly is trying to bring on another 20,000 health-care workers, with a mix of recruitment and calling people back from retirement. But reaching that goal will take time. Angelo Pan, the director of the infectious-disease unit at a hospital in Cremona, said he once be- lieved his hospital was well-posi- tioned to handle a potential outbreak. The hospital had 12 beds for infectious-disease p atients. It n ow has 2 50 coronavirus patients. Pan said about 8 percent of the people who have come for coronavirus treatment have died. Some of the doctors have become his patients. “I’m afraid,” he said. “People say, ‘ You can’t s ay y ou are afraid.’ I understand you shouldn’t say it. But it’s n ot a joke. “I hope not to die of this d isease.” [email protected] [email protected]

loveday Morris in Berlin and claudia cavaliere in Milan contributed to this report.

near-complete nationwide commercial lockdown. The goal, officials say, is to keep people indoors and slow the growth of cases, eas- ing the burden on the hospitals. But the results won’t be immedi- ate, given the incubation period of the virus. Numbers are expected to continue to rise in the days ahead. There is concern not only about Lombardy — where cases have risen from 2,250 to 8,725 in a week — but also other p arts of the country, particularly the poorer south, where the virus has spread less rapidly but hospitals are far less equipped. “I’m afraid that the south of Italy could have in a few weeks a worse situation,” s aid maria rita Gismon- do, a virologist at Luigi Sacco Uni- versity Hospital in milan. Lombardy provides a grim pic- ture of how the virus’s danger grows when a health system is overburdened. The region ac- counts for about one-sixth of Italy’s population but nearly 60 percent of its coronavirus cases and 75 percent of its coronavirus deaths. Among those treated in Lombardy, the fatality rate is more than twice as high — 8 .5 percent, compared with 4 percent elsewhere in the nation. And the problem is snow- balling: The region has reported nearly half of its 617 coronavirus deaths in the past two days. “Lombardy is the I talian Wuhan, and the situation is worsening day by day,” s aid p ublic health research- er Nino Cartabellotta, president of the Gimbe foundation. “This is a red flag of the hospital overload in Lombardy that goes along with the narrative of health professionals o n the f ront line.” In interviews this week, and in social media posts that have gone viral, health-care workers have described a feeling of powerless- ness mixed with stress and fear. They stay away from their fami- lies. They speak angrily about those who still compare the coronavirus to seasonal influenza. Cristina mascheroni, the head of a Lombardy association of intensive care doctors, said colleagues in WhatsApp groups were de- scribing the situation as warlike.

luca Bruno/associated Press Nurses await patients thursday at a hospital in Brescia, italy. Officials fear they’ll soon have to pick who gets lifesaving care.

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The Washington Post - 13.03.2020

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