Italian slump worsens as Greece falls further

 
Marion Dakers
ITALY’S recession is deeper than first thought, according to an official revision of the figures out yesterday, while Greece’s contraction was slightly milder than first estimates suggested in the final quarter of 2012.

The Italian economy shrank by 0.9 per cent in the fourth quarter, Istat said yesterday, and over 2012 it contracted by 2.8 per cent, worse than the statistics body’s earlier estimate of 2.7 per cent.

Yields on Italian bonds rose slightly yesterday, in one of the first opportunities for the market to react to Friday’s debt rating downgrade from Fitch.

The ratings agency said the uncertainty about Italy’s next government is threatening the country’s ability to stick to its financial reforms.

Beppe Grillo’s anti-establishment Five Star movement, which won more than 160 parliamentary seats in last month’s inconclusive election, has said it wants to lead the next government.

But Italy may nevertheless miss a deadline at the end of April for reforms and fiscal consolidation if a government is not in place to sign off the plans, an Italian diplomat told Reuters.

Greece’s economy shrank at an annual 5.7 per cent in the last three months of 2012, official statistics service Elstat said yesterday, an improvement on the first estimate of six per cent. The Greek government expects a 4.5 per cent contraction this year.