The Italian economy has been
mired in an extended period of stagnation, showing no growth in
annual data and only losses since the second quarter of 2011,
national statistical agency Istat said Wednesday.
Its report came just hours before Premier Matteo Renzi was
scheduled to put before cabinet an expansionary budget for 2015
with 30 billion euros in new adjustments to taxes and spending.
It also coincided with dramatic losses on financial markets
around the globe, as weak economic statistics were reported in
parts of Europe and the United States, spooking investors
worldwide.
Renzi has leaked highlights of his budget plan,
particularly 18 billion euros in tax cuts next year to try to
kickstart growth, which he repeated in a Twitter post Wednesday
morning.
"The difference between the 2014 budget and 2015 is that
there are 18 billion in lower taxes. That's it. Restart Italy,"
Renzi tweeted.
He appeared to be on course to clash with the European
Union over his tax-and-spending plans which, unlike the EU's
emphasis on lowering debt, are instead aimed at boosting Italy's
lackluster economy.
Numerous agencies, from the International Monetary Fund to
the Organization for Economic Development and Cooperation, have
forecast recession in Italy this year, and very modest growth in
2015.
Renzi's own finance department has painted a similar
picture forecasting an overall fall in gross domestic product
(GDP) this year of about -0.3%, slightly less than the average
of about 0.4% loss in 2014.
Istat injected a spark of good news Wednesday, reporting
that its revised figures show that the economy was flat in the
first quarter of the year, rather than falling by 0.1% as
previously thought.
That suggests the country is technically not in recession,
which is defined by two consecutive quarters of negative growth.
These revised figures show that GDP between January and
March of this year was unchanged from the previous quarter,
suggesting stagnation instead of outright recession.
Istat has been revising its measurements of the economy to
take account of the impacts of illegal activities such as
prostitution and drugs, in line with European standards.
Concerns about growth in Italy, Europe, and internationally
weighed heavily on financial markets, with investors watching
closely as all 18 members of the eurozone were due to submit
drafts of their budgets to the European Commission by midnight
Wednesday.
Milan's major stock exchange fell by more than 4% in
trading Wednesday, with the Milan FTSE Mib reaching 18,465
points shortly before closing.
Smaller sell-offs were also reported in other European
markets, including a drop of 2.62% in Paris, 1.78% on London's
FTSE and a loss of 1.9% in Frankfurt's leading Dax market.
Worse results were seen in troubled Greece, where the
market dropped by more than 9% at one point, before recovering
slightly to close about down by about 6.25%.
The spread between the Italy's 10-year bond and its German
equivalent widened by as much as 171.6 basis points before
narrowing to 161 basis points near closing, up from Tuesday's
close of 147 basis points.
Investors became even more nervous after a trio of weak
American data Wednesday showed falling inflation, reduced
consumer spending and weaker manufacturing figures.
Some say that suggested the mighty US economy may not be
able to withstand a global slowing, and such fears led the Dow
Jones Industrial Average to open Wednesday sharply lower.
In early trading it plunged as much as 369 points in the
first minutes of trading before regaining some ground.
Meanwhile in Italy, Istat also announced that its revisions
show GDP fell in the second quarter of 2014 by 0.3% compared
with the same time last year, and fell by 0.2% compared with the
previous quarter.
Other statistics released from the agency painted a bleak
picture, showing that Italian households' purchasing power fell
by 1.4% in the second quarter with respect to the first three
months of this year and 1.5% in comparison with the same period
in 2013.
However, household spending increased 0.2% in the second
quarter with respect to the first three months of 2014 and rose
0.8% on the same period last year.
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