Italian recession worries deepen | Business| Economy and finance news from a German perspective | DW | 07.08.2012
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Italian recession worries deepen

The Italian economy has contracted for the fourth quarter in a row despite all recent endeavors by Rome to curb the crisis. Demand for Italian goods has decreased further both at home and abroad, official data shows.

Italy's economy - the third-largest in the 17-member eurozone - logged a 0.7-percent contraction in the second quarter of 2012, the national statistics office, Istat, announced on Tuesday.

Output decreased in all three sectors - agriculture, industry and services. On a year-on-year basis, Italy's gross domestic product sunk by 2.5 percent. "If current trends continue, the country's economy will shrink by 1.9 percent throughout 2012", Istat said in a statement.

That would be far higher than originally expected by the European Commission which had forecast the economy to drop by only 1.4 percent this year.

Vicious circle

With Italy's economy contracting for yet another quarter, the figures released showed no sign of recession slowing down in the debt-stricken southern European nation. Demand for Italian goods was down again both at home and abroad.

Consumer associations expected spending to fall by a margin not seen since the end of the World War Two. This would partly be a result of recent reforms taken by the government of Prime Minister Mario Monti who had pushed through an austerity package worth 20 billion euros ($24.82 billion) in savings and a number of tax hikes, leaving people with less in their pockets.

Italy's public debt pile still amounts to 123 percent of the country's annual GDP, the highest level in the eurozone with the sole exception of Greece. Italy is forced to pay yields of between 6.0 and 7.0 percent on money borrowed on financial markets. The same goes for companies which have therefore been reluctant to invest.

hg/ (Reuters, dpa)