Updated on
Summary The Italian economy will virtually stagnate in 2012 with growth of just 0.1 percent.
It was revealed by the European Commission on Thursday, as the debt crisis engulfed the eurozones third-biggest economy.A renewed slowdown in economic activity is now under way in Italy, amid high risk aversion and increasing uncertainty in the domestic and international economic environment, the commission said in its fall EU economic report.The surge in Italys borrowing costs has weighed on the economy, which had been previously forecast to grow by 1.0 percent in 2012, the commission said.Growth is projected to remain flat in the third quarter of 2011 and shrink by 0.2 percent in the last three months of the year, the report said.For 2011, the economy is now forecast to grow by 0.5 percent instead of 1.0 percent.The modest recovery experienced by Italy after the 2008-09 crisis is coming to a standstill in the second half of 2011 and growth is expected to remain subdued over the forecast horizon, the commission said.Another factor weighing on growth is the budget cuts that the government is planning to enact in order to restore market confidence, the report said.The commission said the Italian public deficit will reach 2.3 percent next year, below the eurozones ceiling of 3.0 percent but well off the governments 1.6 percent target.The commissions report was prepared before Italys borrowing rates soared to new record heights this week, reaching a dangerous 7.0 percent on Wednesday.
