Italy's recession worse than expected

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Italy's economy, the third-largest in the eurozone, lost more ground than expected in the second quarter of 2012, national statistics office Istat said on Monday.

From April to June, Italian gross domestic product (GDP) shrank by 0.8 per cent compared to the previous quarter, the same rate at which it contracted in the first quarter of the year, Istat said.

The data was released days after Prime Minister Mario Monti insisted that the worst was behind for his crisis-battered country and insisted the economy would pick up again next year.

On an annual basis, GDP fell by 2.6 per cent, its worst performance since 2009.

Output been falling since the third quarter of 2011. Technically, a country is said to be in recession once it records negative quarterly growth twice in a row.

In August, Istat had estimated that GDP had experienced a quarterly contraction of only 0.7 per cent and an annual one of 2.5 per cent.

On current trends, the Italian economy will shrink by 2.1 per cent over the course of 2012, Istat warned.

Paolo Pizzoli, an analyst with the Dutch ING bank, was even more pessimistic, forecasting a 2.2-per-cent fall.

However, he did not expect Monti's government to need extra austerity measures to keep its budget targets, which are harder to meet with an economy in deeper recession.

“Underlying developments in the state sector borrowing seem good enough as not to jeopardize the target of a structural balanced budget by the end of 2013,” Pizzoli said. - Sapa-dpa

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