Recession hits Italy

After Germany, it could be Italy slipping into recession. Official data show that a stagnation-hit Italian economy registered a second successive decline in output in the third quarter.

The Italian economy has contracted 0.3 per cent in the second quarter, according to Mario Draghi, International Monetary Fund and European Central Bank board member. The Italian economy could very well be in the grip of its fourth recession this century from what recent figures seem to indicate. Europe's fourth largest economy will likely end up shrinking 0.1 per cent this year followed by 0.2 per cent next year, according to an IMF forecast.

With all major indicators, including production figures and retail sales, showing negative trends, Confindustria, the leading organisation representing manufacturing and service companies in Italy, recently said Italy ''was in the darkest moment of the economic and financial crisis.''

Meanwhile, according to reports, the Italian government seems have drawn up plans to provide a capital infusion of 30 billion euros ($39 billion) for the troubled banking sector. This is being seen as an attempt to shore up liquidity for building up lending capacities for Italian companies. The news comes in the wake of reports that the government was not considering recapitalisation of the banking sector. Given the sensitive nature of the issue the Italian government is averse to officially disclosing the exact value of the package.