Italy in recession after economy shrinks in Q4

The Italian economy contracted in the fourth quarter of 2018, plunging the country into a technical recession, official data showed yesterday. The 0.2 per cent contraction -- following a 0.1pc fall in the third quarter -- will put pressure on the populist government in the eurozone’s third largest economy, which took power in June on the back of big-spending electoral promises. Italy’s Prime Minister Giuseppe Conte had anticipated the bad news on Wednesday during a business conference in Milan.

“Analysts tell us we’ll likely still suffer a bit at the start of this year,” he said, pointing the finger at a slowdown in China and Germany which are hurting Italian exports. “But all the elements are there to recover in the second half,” Conte added. The coalition government of the anti-establishment Five Star Movement (M5S) and the far-right League party was forced to water down its ambitious and costly budget in December to avoid being punished by the European Commission and the financial markets.

A slowdown will make it even harder to follow through on expensive vote-winning measures both parties promised their bases, from a reform to the pension system and income support for the poor. Thursday’s data “reflect a marked worsening of the industrial sector’s performance, and of a negative contribution of agriculture,” national statistics institute Istat said.