Saturday 20 January 2018

Struggling Italian economy slips back into recession

Matteo Renzi, Italy's prime minister
Matteo Renzi, Italy's prime minister

Italy has unexpectedly returned to recession, highlighting the difficulties faced by the country's prime minister Matteo Renzi

Italy's economy shrank 0.2pc in the second quarter after contracting 0.1pc in the previous three months.

The figures come on the eve of the European Central Bank's August interest-rate meeting, two months after it announced an unprecedented package of stimulus measures including a negative deposit rate and targeted loans to banks.

Those policies will take time to have an impact, leaving the economy at risk from a crisis in eastern Europe that is already undermining business and investor confidence.

The renewed recession in Italy, the euro area's third- biggest economy, will weigh on the region's second-quarter gross domestic product (GDP) figures. The currency bloc's economy expanded 0.2pc in the three months through March and the ECB predicts growth of 1pc this year.

Second-quarter GDP data is scheduled to be published next week along with figures for Germany and France, the euro zone's biggest economies.

Spain, the fourth-biggest economy, has already reported growth of 0.6pc for the period, beating estimates and marking a fourth straight quarter of expansion.

"The euro zone recovery, which began in spring last year and has gradually spread around most of the currency area, has not yet taken hold in Italy," said Christian Schulz, European economist at Berenberg Bank.

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