Italy's recession breaks longevity record

Govt vows to lift economy

Italy's recession breaks longevity record

(By Denis Greenan). Rome, May 15 - Italy's recession has become the longest on record with seven straight quarterly drops in gross domestic product (GDP), underscoring the task Enrico Letta's new government faces in stoking growth while keeping to European Union-mandated budget restrictions. GDP fell 0.5% in the first three months of 2013, national statistics agency Istat said Wednesday. It is the longest recession since Istat started using its current GDP calculation system in the first quarter of 1990. Labour Minister Enrico Giovannini called the data "serious" while Transport Minister Maurizio Lupi reiterated the government's "moral and political commitment to creating the conditions for growth". Consumer associations Federconsumatori and Adusbef said in a joint statement that they were "extremely worried" about the data, saying they forecast Italy's GDP would drop 2% this year. "The only road to take to reverse the trend is to work to revive domestic demand," said the associations, calling on Letta's government to avert a 1% rise in the top band of value added tax scheduled to come into force in July. But the head of industrial employers' group Confindustria, Giorgio Squinzi, was upbeat, saying "Italy's decline is not unstoppable". "I say as a cyclist, you must never stop pedalling," he added. Letta has vowed to come up with a pump-priming plan by the summer and will ask the European Union to exempt spending to create jobs for young people from the 3% deficit-to-GDP ratio EU members have to stick to. He has also said he will work with French President Francois Hollande to try to persuade Germany to steer the EU away from austerity policies and onto growth. The government says Italy is set to hit 2.9% this year, emerging from a deficit-exceeding procedure, while France recently got a two-year extension on the deadline to hit the target set by the EU's founding charter. In its report Wednesday, Istat added that GDP shrank 2.3% on an annual basis, worse than most analysts expected. International observers see another contraction coming next quarter, albeit a smaller one. Letta, who took office last month at the head of an unprecedented left-right coalition, has said stimulating the economy, expecially to help unemployed youth, is an "absolute priority" for his fledgling administration. He hopes to get a helping hand from the EU at a summit at the end of June. "Europe must respond to youth unemployment, which has reached absolutely unsustainable levels," he said. "We ask that the next European Council summit in June concentrates on an extraordinary plan for youth unemployment that launches concrete measures immediately", Letta said earlier this week. Nearly 40% of Italian youth are unemployed, according to Istat. Giovannini, who was Istat head until joining the government, said this month Italy's economic crisis was the worst since the founding of the republic after the Second World War. Last week Istat said it expects GDP to drop 1.4% this year following a 2.4% fall in 2012. The Italian government forecast issued by Letta's predecessor Mario Monti saw GDP shrinking 1.3% this year, but analysts say this is optimistic. Economy Minister Fabrizio Saccomanni reiterated earlier this week Italy would meet the 3% target. But the Organisation for Economic Cooperation and Development said the deficit would be 3.3% of GDP this year and 3.8% in 2014. The public debt will hit a new record of 131.5% of GDP this year, the OECD said, and 134.2% next, rather than falling to the 129% forecast by the government.

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