Bloomberg News

Italy Recession to Last Until Late 2012, Confindustria Says

December 16, 2011

(Updates with comments from the report in second paragraph, Passera in fourth, budget plan in sixth-eighth paragraphs.)

Dec. 15 (Bloomberg) -- The Italian economy will remain in recession until the second half of next year and expand less than previously forecast in 2011, Confindustria, the country’s employers’ lobby, said in a report today.

The euro area is facing a “winter of recession” and Italy, which was hit sooner, will be also hit harder, the report said.

Confindustria forecast gross domestic product will contract 1.6 percent in 2012, compared with a September forecast for an expansion of 0.2 percent. Confindustria also cut its estimate for GDP growth this year to 0.5 percent from 0.7 percent.

“If anyone had any doubts, after the numbers from Confindustria, we can no longer hide the fact -- we are in recession, even if we didn’t cause it,” Development Minister Corrado Passera said at the presentation of the report in Rome today. “The situation today is worse than we expected,” when the government came to power a month ago.

Unemployment will reach 9 percent in 2013 and the budget deficit will fall to 0.1 percent of GDP the same year, the report said, indicating the government would achieve its balanced-budget goal for that year.

The government led by Italian Prime Minister Mario Monti approved on Dec. 4 a 30 billion-euro ($39 billion) plan aimed at balancing the budget. The package overhauls the pension system, reinstates the main property tax, raises gasoline levies. It also seeks to curtail tax evasion and spur economic growth by opening up some professions and offering tax breaks to companies hiring new people and women.

Vote Tomorrow

Monti requested a confidence vote in the Chamber of Deputies, which will vote on the plan tomorrow. After that the plan will pass to the Senate, which is set to begin debate on the measures on Dec. 21 with the final vote set for Dec. 23.

The budget plan is a first step in the right direction but “more has to be done” on the growth side, Confindustria head Emma Marcegaglia said today, adding that Italy can make it.

Monti said today that his government was working on a new package of growth measures and also planned changes to labor laws and the welfare system to spur the economy.

--Editors: Andrew Davis, Andrew Atkinson

To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editors responsible for this story: Angela Cullen at acullen8@bloomberg.net.


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