Italy’s figures echo a trend seen across the euro region. Second-quarter growth slowed in France, Spain, Austria and Belgium, and Germany’s economy is forecast to have barely expanded. The 19-nation euro zone expanded 0.2% last quarter, down from 0.4% in the previous three months.
As Italy’s economy struggles to find any momentum, the backdrop is dominated by political fragility, with lingering questions over whether Deputy Prime Minister Matteo Salvini will pull out of his alliance with fellow minister Luigi Di Maio. There’s also been a long-running clash with the European Union over the country’s budget plans.
A slowdown in global trade has hampered export-reliant Italy. Earlier this month, the Bank of Italy said that output has been hit by the “weak industrial cycle, common to Germany too, caused by persisting trade tensions.”
Italy avoided censure from the European Union over its fiscal plans last month, but its program for 2020 could prove controversial unless the populist government does enough to rein in the huge debt load.
Finance Minister Giovanni Tria and Prime Minister Giuseppe Conte have reassured the EU that commitment to fiscal discipline will extend beyond this year, avoiding a procedure that could lead to a multi-billion-euro penalty.
But in its quarterly bulletin, the central bank warned that risks to growth stem from both global trade tensions and from “heightened uncertainty over the fiscal policy stance from next year onward.”
By Chiara Albanese and Lorenzo Totaro