Official statistics confirm that Italy’s economy contracted by a quarterly rate of 0.8 percent in the first three months of the year, the worst contraction in three years.
The painful recession keeps pressure on Premier Mario Monti’s government, which is struggling to fend off the debt crisis and the perception that Italy could be next to seek a bailout following Spain's decision over the weekend to ask for help for its ailing banks.
The ISTAT statistics agency says the contraction is the worst since the first quarter of 2009, when the economy contracted by 3.5 percent. ISTAT forecasts that the Italian economy will contract by 1.3 percent this year, slightly more than the government’s estimate of 1.2 percent.
Spending by families is down significantly.
Meanwhile, Italy has done what is needed to save itself over the last few months, Economic Development Minister Corrado Passera said on Monday, following a deal on a European rescue of Spain’s banking sector.
“This great discipline that we have imposed on ourselves in terms of public finances makes us one of the countries best equipped to confront the financial turbulence that Europe finds itself in today,” Passera told reporters.
Italy began tightening its public finances in 2010 with a series of austerity measures and is aiming to balance its budget by 2013 as well as reduce its public debt mountain of 1.9 trillion euros ($2.4 trillion).
Asked about the Spanish bank rescue, Passera said Europe had put forward a “credible plan” adding: “To not save Europe and leave the euro to fall apart... would be far more costly than to help countries in difficulty.”
Passera, who is preparing a new raft of measures to relaunch the economy, admitted however that Italy still had “a lot to do” to boost growth.