Economic policies implemented by the populist
government in Rome make Italy vulnerable to a crisis of market confidence, with
the poorest likely to suffer the most, the International Monetary Fund has warned.
"The authorities' policies could leave Italy vulnerable to a renewed loss
of market confidence," an IMF annual report on the
"Italy could then be forced into a notable fiscal contraction, pushing a
weakening economy into a recession. The burden would fall disproportionately on
On January 31, official data showed that the Italian economy, the
eurozone's third largest, contracted in the fourth quarter of 2018, which meant
the country was in a technical recession.
But Italy's deputy prime minister and M5S leader Luigi Di Maio quickly rejected the report, saying the IMF "has starved people for decades" and lacked the credibility to attack policies.
Italy has a long standing problem of weak economic growth.
The economy is still 5% smaller than it was at the peak before the global recession a decade ago.
The renewed downturn partly reflects wider problems across Europe.
The Eurozone has managed continued growth, but it has been weak- 0.2% in the final three months of 2018, according to figures which have just been published.
The region's industry has been affected by global trade tensions and slowing growth in China.
These developments have had an impact in Germany, the Eurozone's biggest exporter.
Italy falls into recession
Italy's economy contracted for the second consecutive quarter at the end of last year, data showed on Thursday, throwing the country into recession in a setback for the new anti-establishment government.
Gross domestic product fell a quarterly 0.2% between October and December, following a 0.1% decline in the third quarter, and was up 0.1% on an annual basis, national statistics bureau Istat reported.
Is recession looming as Italy rescues another bank?
The bailout of Banca Carige is making the Italian coalition government in Rome face economic reality.
Lorenzo Codogno, a former chief economist at Italy's Treasury, tells the BBC's Russell Padmore how the populist partnership of the Five Star Movement and the League is being forced to reverse its anti-establishment and Eurosceptic policies.
(Picture: A branch of Banca Carige in Milan. Copyright: Mairo Cinquetti/NurPhoto.)