Sunday - Jun 25, 2017

Italy slips back into recession during the second quarter


Italy slips back into recession during the second quarter

According to data released by statistics institute Istat, the economy of Italy contracted at an annualised rate of 0.8 during the second quarter of 2014 which ending on June 30th, meaning that the country has slipped back into recession, for the third time since 2008.

The news of Italy’s setback, which was generally unexpected, has already been interpreted by financial commentators as a considerable blow to the long overdue financial recovery within the European member states particularly in the south of the continent.

The second quarter of 2014 was the second in succession that industrial output fell in Italy, meeting the common international definition of what is regarded as being in a state of recession.

The weak Italian data, combined with growing fears that the conflict in Ukraine might be heading to further impasse, contributed to a general slide running across all of the major European financial markets on Wednesday. Stock markets, with Italy’s in particular, fell sharply with investors rushing to spread their risks in safer havens, in particular among German government bonds.

Italy has been under pressure for some time to cut its heavy public debt, which is expected to reach as high as 135% of the GDP this year, as the situation which has increased pressure on Premier Matteo Renzi to find ways to breathe new life into the country’s stagnating economy.

Italy’s return to recession is expected to have an overall negative effect on the Eurozone’s second-quarter GDP performance, due to be published within the coming week. Economists in the region are anticipating a disappointing annualized Eurozone growth figure of less than 1%, driven by sluggish growth in France and Germany.

Most European governments had reportedly been hoping for a more vigorous financial performance during 2014, of around 2% a year in order to make serious inroads in bringing the economy back on track whilst reducing the region’s high unemployment figures.

In the meantime sluggish performances within the European economies is also keeping inflation at depressed levels of around 0.5%, whilst keeping debt burdens high.

If it comes to pass that the second-quarter is indeed a flat one in terms of growth within the Eurozone, it will undoubtedly place some considerable pressure on the European Central Bank (ECB) to provide another injection of monetary stimulus, a reaction that would be liable to prove unpopular from key members of its board, with the German Bundesbank expected to be a major opponent.

Photo credit: Presidenza della Repubblica — quirinale.it

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