Bloomberg News

Italian Business Confidence Falls to 2-Year Low on Economic Woes

February 03, 2012

Jan. 30 (Bloomberg) -- Italian business confidence fell in January to the lowest in more than two years as the economy probably entered into a recession under the weight of austerity measures to fight the sovereign debt crisis.

The manufacturing-sentiment index dropped to 92.1, the lowest since November 2009, from 92.5 in December, Rome-based national statistics institute Istat said today. Economists had predicted a reading of 92.3, according to the median of 16 estimates in a Bloomberg News survey.

The mood among executives mirrors the pessimism of Italian consumers as Prime Minister Mario Monti implements a 20 billion- euro ($26 billion) package of spending cuts and tax increases to eliminate the budget deficit and tame the debt. The euro- region’s third-biggest economy shrank in the third quarter, with the government forecasting a further contraction in the final quarter of last year, meaning Italy may already be in its fourth recession since 2001.

Fiat SpA may see its European sales decline by 500,000 cars a year as fallout from the debt crisis hits growth and demand, Chief Executive Officer Sergio Marchionne said earlier this month.

Monti, who took office in November as head of an unelected government of non-politicians, is seeking to show investors he can tame Italy’s 1.9 trillion-euro debt, which is bigger than that of Spain, Greece, Portugal and Ireland combined.

Many are rejecting his calls for shared sacrifices now to spur future prosperity. A wildcat strike by truck drivers last week clogged traffic on Italian highways, forcing Fiat to halt car production and leaving some cities short of gasoline and food.

--Editors: Andrew Davis, Jerrold Colten

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