Italy′s fiscal woes grow bigger as EU summit unfolds | Business| Economy and finance news from a German perspective | DW | 28.06.2012
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Italy's fiscal woes grow bigger as EU summit unfolds

Italy has posted a high inflation rate for June amid a recent surge in food prices. The eurozone nation's growth outlook remains bleak, and borrowing fresh money is becoming a costly affair for the debt-stricken economy.

Italian inflation rose to 3.3 percent in June over a 12-month period, the national statistics agency, Istat, reported on Thursday. It said the renewed rise in inflation levels was caused mainly by soaring food prices, while fuel prices went down considerably.

Unemployment in the third-largest eurozone economy is expected to reach 10.4 percent instead of the previously estimated 8.6 percent, Italy's main employers' association, Confindustria, maintained.

"We're in an abyss," Confindustria Chief Economist Luca Paolazzi said while presenting the union's latest job market study in Rome. He added that Italy's recession was more intense than initially estimated, with gross domestic product (GDP) contracting by another 0.8 percent in the first quarter of 2012, marking its third consecutive quarterly fall.

Pinning hopes on EU summit

Such negative business indicators have made it hard for Italy to obtain fresh money on the financial markets. It did manage, however, to sell a total of 5.42 billion euros ($5.66 billion) worth of five to 10-year maturity bonds on Thursday, but at yields reaching levels not seen since December of last year.

Market confidence in Italy has been sliding as the southern European nation is finding itself sitting on a huge debt pile and being hit by a wave of market panic caused by the banking sector turmoil in neighboring Spain.

At the current EU summit in Brussels, Italian Prime Minister Mario Monti hopes to find support for the concept of shared debt which he views as an effective instrument to bring down soaring borrowing costs.

hg/sej (Reuters, AFP, dpa)