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Economy shrinks, debt soars, spending drops, says Istat

Weak Italian finances slide to lows not seen in 22 years

03 March, 16:59
Economy shrinks, debt soars, spending drops, says Istat (By Sandra Cordon) (ANSA) - Rome, March 3 - Italy's gross domestic product (GDP) fell by 1.9% in 2013 while debt soared to new records and consumers cinched their belts tighter, national statistical agency Istat said Monday, providing further evidence of the severe weakness of the country's economy.

The final results of the economic losses last year were even worse than the 1.7% drop that had been expected and follows a loss in GDP of 2.4% in 2012, according to revised data from Istat.

Household spending on food as well as public debt levels have reached low points not seen in at least 22 years, the agency warned.

Consumer and business groups alike described the statistics as worrisome and called on the new government of Premier Matteo Renzi to find measures to boost consumption growth.

"The fall in gross domestic product by close to 2% is an extremely alarming signal about the condition of our economic system," Italy's consumer associations Federconsumatori and Adusbef said in a joint statement. "At this rate, 2014 will be much worse," they added.

In the face of such weakness, "government cannot remain is essential to take urgent measures for recovery and growth".

The effects of the weak economy were dramatically illustrated by numbers showing that household spending on food and non-alcoholic beverages plunged to a record low in 2013, Istat said.

Not since Istat began recording spending data in 1990 have household budgets hit such a low level, the agency said.

Spending totaled about 114 billion euro last year on food and beverages, down by 3.6 billion euro from 2012, the agency said.

Families cut their spending on clothing by 5.2% and on health products and services by 5.7%.

The pinch could be seen in a rise in Italy's public debt, which reached 132.6% of GDP last year - the highest level since Istat began using its current calculation method in 1990 and a significant increase from 127% of GDP in 2012.

If there was one positive note to the latest economic statistics, Istat said that the average Italian tax burden slipped by 0.2 percentage points last year, to 43.8% from 44% in 2012.

More must be done to lower taxes further to try to increase GDP and in that way, reduce the debt-to-GDP ratio, said Italian consumer group Codacons.

"The only immediate possibility for the government to bring the country out of recession is to change the composition of revenue," and rely less on taxes, which it said must be lowered dramatically.

Istat also noted that employment in large firms of at least 500 employees was hit hard last year, shedding 1.3% of staff after shrinking by 0.8% in 2012.

Rising joblessness in general has been one of the most painful aspects of Italy's recession that took the country to lows not seen since the Second World War.

Last week, Istat reported that Italian unemployment in January hit a record 12.9%, with some 478,000 jobs lost in 2013.

That made it the worst year since the global financial crisis of 2008-2009, with an average annual jobless rate of 12.2% last year.

Between 2008 and 2013, a total of 984,000 jobs in Italy were lost to the economic crisis.

Also last week, the European Commission forecast growth in the Italian economy will be weaker this year than previously forecast and the country's debt as a percentage of gross domestic product will rise in 2014.

The EC revised down Italy's 2014 growth forecast to 0.6% but said 2015 looks brighter, as stronger consumer confidence and external demand boost the economy.

Still, European Central Bank President Mario Draghi said Monday that the worst was likely over for the European economy as a whole. "We can safely say that the worst has been averted," Draghi said at a European Parliament hearing in Brussels. "The glass is at least half-full," he added.