Italy’s economy tipped into recession at the end of last year, according to latest figures. In the final three months of 2018, the economy shrank by 0.2 percent, following a 0.1 percent decline in the third quarter, the Istat statistics office said.
Italian Prime Minister Giuseppe Conte said the contraction was likely to continue into 2019. Meanwhile, figures from the EU showed economic growth in the 19-country eurozone still languishing BBC reported.
Growth in the euro area remained at 0.2 percent in the final quarter of 2018, the same as the previous quarter and in line with analysts’ expectations.
The figures, issued by the Eurostat agency, showed that in the 28-nation EU as a whole, fourth-quarter growth was 0.3 percent.
In contrast to Italy, some other eurozone economies expanded more than expected, with France and Spain posting growth rates of 0.3 percent and 0.7 percent quarter-on-quarter respectively.
Italy’s statistics office said agriculture, forestry, fishing, and industry had all contributed to the economic downturn, while a rise in net exports failed to offset those declines.
Italy’s coalition government was forced to revise its expansionary 2019 budget last month after the European Commission raised concerns about the impact on the country’s debt levels.
The renewed recession in Italy aggravates the problem the government has with its finances.
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The ruling parties’ desire to increase spending to meet election campaign commitments led to a stand-off with the European Commission which argued Italy was going to be borrowing too much. Rome pared back its plans and the dispute was resolved.
But the fact that the economy has turned out to be even weaker is bad news for the government finances.
Tax revenue will be hit and that will tend to lead to a bigger financial hole to be filled by borrowing.
Italy’s problem is its accumulated debt, which is on one measure the largest in the Eurozone.
It would be a huge problem for the rest of the Eurozone if Italy were to suffer the kind of debt crisis that Greece and others experienced a few years ago.
That is not a near term prospect, but Italy’s persistently weak economic performance makes it very hard to banish that risk conclusively.