Italy slumps back into recession as Renzi reforms fail to materialise
Italy has slumped back into recession, with figures yesterday confirming a 0.2 per cent dip in output during the second quarter and casting a spotlight on the country’s dreary economic prospects.
The dip in GDP comes after a 0.1 per cent decline in the first three months of the year. The Italian economy emerged from a previous recession which lasted for more than two years only in the last quarter of 2013.
Italian Prime Minister Matteo Renzi has promoted the idea of significant reforms, especially to Italy’s inflexible labour market, but little legislation has been forthcoming.
Renzi has now been in office for nearly six months, and has also repeatedly called for less strict fiscal rules on Eurozone governments, in exchange for structural reforms.
Italy’s inflation rate is even lower than the Eurozone in general, coming in at just 0.1 per cent this July, nowhere close to the official European Central Bank target for two per cent price growth.
“Even if we assume – somewhat generously – that Italian growth returns eventually to its average rate of 1.5 per cent seen in the 30 years running up to the crisis, it would still require an inflation rate in excess of the two per cent target just to stabilise Italian debt as a proportion of GDP,” said an analyst at Fathom Consulting.
“With no growth, no inflation, and of course no currency of its own, something needs to give and soon if Italy is to continue to finance its vast national debt.”