Despite the approval of a EUR 70 billion austerity plan, the state of Italy's public finances remained under the scrutiny of financial markets in July. Concerns are spreading regarding the credibility of the fiscal adjustment and the sustainability of the country's public debt, which - at almost 120% of GDP - is the second largest in the Eurozone. The pressure on Italy's finances intensified during the trading session of 8 July, when yields on 10-year Italian bonds peaked at 5.37%, the highest levels since March 2002. Analysts and investors were sceptical that the deficit reduction of plan - originally envisaged to amount to savings of EUR 47 billion - would be sufficient to put the country back on the track of fiscal sustainability. In addition, lack of information regarding the details of the plan, disagreements among the members of the governing majority and the involvement of Economy Minister Giulio Tremonti in a corruption scandal cast a shadow on the credibility of the Italian government and its ability to pull through the necessary fiscal cuts. In response to market concerns, the government presented a beefed-up version of the austerity package to both houses of Parliament, which approved the modified plan on 14 and 15 July. The new set of measures entails total savings of EUR 70 billion, which is to be achieved over the next three years through spending cuts in healthcare, reduced funding to municipalities and extending the 2010 public sector wage freeze to 2014. Furthermore, new taxes were introduced on gasoline and trading accounts, in addition to co-payment for certain healthcare services. The timely approval of the plan was not enough to quell financial markets concerns. While bond yields fell briefly following the European agreement on a bailout program for Greece on 21 July, the sell-off of Italian bonds resumed thereafter and yields reached 5.89% by the end of the month. Going forward, political instability and, in particular, further investigations into Tremonti's case will likely put further pressure on Italy's risk premium.
Fears of contagion spread to Italy
July 28, 2011
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Italy Economic News
October 14, 2016
According to revised data released by the Italian Statistical Institute (ISTAT), consumer prices fell 0.2% from the previous month in September.
October 10, 2016
In August, industrial output increased 1.7% from the previous month, accelerating from July’s revised 0.7% increase (previously reported: +0.4% month-on-month).
October 3, 2016
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) rose from 49.8 in August to 51.0 in September, taking it above the 50-threshold that separates expansion from contraction in the manufacturing sector. September’s result mainly reflected a return to growth in new orders, which, in the previous month, had dropped slightly for the first time in over one-and-a-half years.
September 30, 2016
According to provisional data released by the Italian Statistical Institute (ISTAT), consumer prices fell 0.2% over the previous month in September, contrasting August’s 0.2% increase and marking the lowest result in seven months.
September 28, 2016
The National Institute of Statistics’ (Istat) composite business confidence indicator (IESE, Istat Economic Sentiment Indicator), which covers the manufacturing, construction, service and retail sectors, increased from a revised 99.5 in August (previously reported: 99.4) to 101.0 in September. All four categories of the indicator improved compared to August.