Amid Europe's lockdowns, no safety net for millions in black economy

[April 01, 2020]  By Giuseppe Fonte, Angelo Amante and George Georgiopoulos

ROME/ATHENS (Reuters) - Bricklayer Salvatore La Barbera is worried that in a matter of days his family of four will run out of food and, with Italy locked down by coronavirus, there is no way he can earn money to buy more.

"Working in the black market is impossible, because the police ask why you are walking in the street," he told Reuters from Palermo, the capital of Sicily. "They want to know everything and you risk being fined."

La Barbera is one of millions in the shadow economies of Europe who face dire risks because they will fall through the safety nets being rolled out as economies slide into reverse.

In Sicily, one of Italy's poorest regions, concerns have been raised over the plight of the needy after some people refused to pay for goods at a Palermo supermarket and police were called.

According to an International Monetary Fund report in November, the share of the shadow economy is significant in many European countries, ranging from 10% to over 40%.

It put Italy's shadow economy at 27.3% in 2016, the latest year for estimates, but Greece - with 30.2% - had the highest rate among the advanced economies that share the euro currency.

The numbers working in the informal economy go much higher in developing economies. The International Labour Organization puts the total at 2 billion, or more than 60% of the world's employed population.

Bailout money doled out by governments to private companies to encourage them to retain employees through the coronavirus storm is unlikely to help those in shadow economies because, due to widespread lockdowns, it won't generate spending and there will be no trickle-down benefits.

Greece has offered the self-employed 800 euros a month as long as the crisis lasts, provided they pay taxes, leaving hundreds of thousands without financial help.

"All others who work in the gig economy but are completely off radar, meaning they do not report any income to the tax authorities, are not eligible for this support," a finance ministry official said, adding that assistance for those in the black economy would be announced in the coming days.

"NO ONE WILL BE LEFT BEHIND"

One of those who will get no unemployment benefit or state handout is Katerina, 30, a literature teacher from Crete who hasn't paid taxes in eight years.

"I had five students. I lost three because of the coronavirus crisis. Some parents couldn't pay me because they have financial problems too," said Katerina, who earns about 10 euros an hour for lessons. She declined to give her full name.

"I have been forced to put off payments for electricity and water and I have asked the bank to postpone instalments on my car," she said. "Right now I'm fully dependent on my parents financially but I don't know how long they will be able to support me."

A man reaches to a basket, that were hung up so people can donate or take for free food, as Italy struggles to contain the spread of coronavirus disease (COVID-19), in Naples, Italy March 30, 2020. The sign reads: "Who can puts in, who can't takes". REUTERS/Ciro De Luca

In Spain, some domestic workers have lost their jobs due to the crisis and are living from day to day, according to Ana Heras, coordinator of Caritas's Economic Solidarity team.

"They can’t go, as we have, to fill up their trolleys at the supermarket with two weeks’ worth of shopping," she said. "We've seen many domestic workers coming to our food banks as a result."

In Italy, which has suffered the deadliest coronavirus outbreak and has about 3.7 million people working in the black economy, Prime Minister Giuseppe Conte told those struggling to provide for their families that the state would help.

He promised a 4.3 billion euro fund for mayors and released another 400 million euros for food coupons "for people who don't have the money to do their own shopping".

"No one will be left behind," Conte said.

A government source said the Treasury was looking at creating an emergency salary of between 600-800 euros a month for those who have no income from work or pension and are excluded from the current welfare safety net.

That will mainly help seasonal workers, domestic workers, and those dependent on the black market.

Emanuel Sammartino, 32, was laid off from his seasonal job at the airport in Sicily's second city Catania. He is expecting a baby in August and is surviving on his savings.

"My company alone had to provide 40 seasonal workers, but up to 90% of flights have been cancelled so those jobs have gone. The government has not taken into account our situation yet," he said.

In Palermo, 39-year-old La Barbera said he was fired from a job last July, and then worked for himself as a bricklayer and a blacksmith.

He has also worked in the film industry as an electrician, including on the set of "The Traitor", the story of mafia boss Tommaso Buscetta. However, no films are being made now.

"Day after day I think what can I do to deal with this bloody virus," he said. "But now everything has stopped."

(Additional reporting by Lefteris Papadiomas, Angelo Amante, Crispian Balmer and Clara-Laeila Laudette; Writing by John Chalmers; Editing by Giles Elgood)

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