MILAN — Italy has fallen back into recession, intensifying concerns about the 19-country eurozone economy and a possible flare-up in the debt market jitters that have haunted the bloc in the past.
The
Italian economy, the third-largest in the eurozone, contracted by a
quarterly rate of 0.2 percent in the fourth quarter of 2018, the
national statistics agency said.
Following a 0.1 percent drop in
the previous three-month period that means Italy is in a technical
recession, defined as two straight quarters of economic contraction —
just four years after its last one.
Italy’s recession is one
reason why the wider eurozone slowed in 2018, along with uncertainties
related to Brexit, the China-U.S. trade spat and new vehicle emissions
standards.
Though the eurozone is performing better than in the
dark days of the debt crisis, which threatened to break up the euro
currency, it’s still lagging the U.S. economy, which is projected to
have grown about 3 percent in 2018. As a result, unemployment in the
eurozone is about double the U.S.’s 4 percent at 7.9 percent.
The
eurozone economy as a whole grew by a meager 0.2 percent in the final
quarter, the same as in the previous quarter, according to provisional
figures released Thursday by the Eurostat statistics agency.
It
expanded by 1.8 percent in 2018 overall, its weakest rate in four years.
That’s lower than had been anticipated a year ago, when the bloc was
expected to slow only slightly from 2017’s strong 2.4 percent rate.
The
Italian economy has become an acute source of concern over the past few
months, partly as a result of the new populist government’s spat with
the European Union’s executive Commission over its budget plans, which
has undermined business confidence and seen Italian borrowing rates in
bond markets spike higher.
The government, elected against the
backdrop of economic disappointment after years — even decades — of
stagnant growth, wants to ramp up spending to get the economy going. It
wants to provide more social security payments and to roll back a
pension reform.
The plan means Italy would not reduce its debt load, which at over 130 percent is the highest in Europe after Greece.
The
EU Commission, still haunted by the memory of the debt crisis that
required bailouts for a number of countries, has insisted that the
Italian government rein back on its spending plans.
Italian
Premier Giuseppe Conte sought to downplay the recession and placed the
blame firmly on the trade spat between the United States and China,
which he says has weighed on Italian exports.
“This is a transitory factor,” he told reporters in Rome.
The
head of Italy’s UNC consumer advocate organization, Massimiliano Dona,
said the weak figures raise questions over the Italian government’s
prediction that the economy will grow by 1 percent in 2019. He said that
could mean the government will have to adjust its spending plans.
Italy
hasn’t been the only reason why the eurozone slowed in 2019. Germany,
Europe’s biggest economy, suffered an unexpected contraction in the
third quarter largely due to changes in emissions standards that hurt
auto sales. And uncertainty over Britain’s exit from the EU has weighed
on sentiment, as has the fear of a global trade war stoked largely by
growing tensions between the United States and China.
Separate
economic indicators point to further weakness at the start of 2019 and
most economists expect a difficult period ahead if the main causes of
uncertainty are not addressed soon.
“The continued decline in
sentiment indicates that the underlying pace of growth has slowed even
further,” said Christoph Weil, an economist at Commerzbank. “Uncertainty
about economic developments in China, the unresolved trade conflict
between the U.S. and China and Brexit continue to weigh on the economic
outlook for 2019.”
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