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Italy economy still shrinking

March 11, 2013

Italy's economic decline accelerated in the final quarter of 2012, indicating that its longest recession in 20 years is set to continue. The country's woes have further worsened after a new ratings downgrade.

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Image: Gianluigi Burlini

Italy's economy shrank by 0.9 percent in the final quarter of 2012, rounding off a full year of economic contraction in which the output of Europe's third largest economy declined by 2.8 percent, according to the latest data released by the Istat statistics agency Monday.

After rates of contraction of 0.9 percent in the first quarter, 0.7 percent in the second, and 0.2 percent in the third three-month period of 2012, the rate between September and December showed Italy's recession deepening again.

Fortunes decline for Fiat

Economists believe Italy's recession, which has become the longest in two decades, won't be over before the second half of 2013.

Fitch more skeptical, cuts rating

However, political uncertainty following an inconclusive February general election in Italy caused international ratings agency Fitch to cut the country's debt rating Friday, expecting the Italy's economy to continue contracting at a rate of 1.8 percent in 2013.

Fitch downgraded Italy's credit rating to BBB+ from A- with a warning of a further downgrade.

The failure to come up with a clear winner would makes it unlikely that a stable new government could be formed in the next few weeks, thereby harming prospects of further reforms.

uhe/dr (Reuters, AFP, dpa)