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Italy Slides Into Recession, Darkening Outlook For Europe 0 0
Italy Slides Into Recession, Darkening Outlook For Europe
MILAN — Italy has fallen back into recession, intensifying concerns
about the 19-country eurozone economy and a possible flare-up
in the debt market jitters that have haunted the bloc in the past.
The Italian economy, the third-largest in the eurozone, contracted
by a quarterly rate of 0.2 percent in the fourth quarter of 2018, the
national statistics agency said.
Following a 0.1 percent drop in the previous three-month period
that means Italy is in a technical recession, defined as two straight
quarters of economic contraction — just four years after its last
Italy’s recession is one reason why the wider eurozone slowed in
2018, along with uncertainties related to Brexit, the China-U.S.
trade spat and new vehicle emissions standards.
Though the eurozone is performing better than in the dark days of
the debt crisis, which threatened to break up the euro currency,
it’s still lagging the U.S. economy, which is projected to have
grown about 3 percent in 2018. As a result, unemployment in the
eurozone is about double the U.S.’s 4 percent at 7.9 percent.
The eurozone economy as a whole grew by a meager 0.2 percent
in the final quarter, the same as in the previous quarter, according
to provisional figures released Thursday by the Eurostat statistics
It expanded by 1.8 percent in 2018 overall, its weakest rate in four
years. That’s lower than had been anticipated a year ago, when
the bloc was expected to slow only slightly from 2017’s strong 2.4
percent rate.
The Italian economy has become an acute source of concern over
the past few months, partly as a result of the new populist
government’s spat with the European Union’s executive
Commission over its budget plans, which has undermined
business confidence and seen Italian borrowing rates in bond
markets spike higher.
The government, elected against the backdrop of economic
disappointment after years — even decades — of stagnant
growth, wants to ramp up spending to get the economy going. It
wants to provide more social security payments and to roll back a
pension reform.
The plan means Italy would not reduce its debt load, which at
over 130 percent is the highest in Europe after Greece.
The EU Commission, still haunted by the memory of the debt
crisis that required bailouts for a number of countries, has insisted
that the Italian government rein back on its spending plans.
Italian Premier Giuseppe Conte sought to downplay the recession
and placed the blame firmly on the trade spat between the United
States and China, which he says has weighed on Italian exports.
“This is a transitory factor,” he told reporters in Rome.
The head of Italy’s UNC consumer advocate organization,
Massimiliano Dona, said the weak figures raise questions over the
Italian government’s prediction that the economy will grow by 1
percent in 2019. He said that could mean the government will
have to adjust its spending plans.
Italy hasn’t been the only reason why the eurozone slowed in
2019. Germany, Europe’s biggest economy, suffered an
unexpected contraction in the third quarter largely due to changes
in emissions standards that hurt auto sales. And uncertainty over
Britain’s exit from the EU has weighed on sentiment, as has the
fear of a global trade war stoked largely by growing tensions
between the United States and China.
Separate economic indicators point to further weakness at the
start of 2019 and most economists expect a difficult period ahead if
the main causes of uncertainty are not addressed soon.
“The continued decline in sentiment indicates that the underlying
pace of growth has slowed even further,” said Christoph Weil, an
economist at Commerzbank. “Uncertainty about economic
developments in China, the unresolved trade conflict between the
U.S. and China and Brexit continue to weigh on the economic
outlook for 2019.”


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