Friday

30th Sep 2016

Italy slips back into recession, Germany rejects France growth appeal

Italy has slipped back into recession putting pressure on Prime Minister Matteo Renzi to fulfil promises to see through major structural reform to boost growth.

The Italian economy, the third largest in the eurozone, shrank 0.2 percent in the second quarter, the country's national statistics office said Wednesday (6 August).

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

In response to the news, Renzi wrote to lawmakers to urge them have "courage" to look at reality.

“The negative growth data should not lead us to make the usual automatic excuses."

Finance minister Pier Carlo Padoan defended the government's reform plans and said the country would not now need a corrective mini budget to stay on the right side of the EU's fiscal rules.

"The (GDP) figure is negative, but there are also positive elements. Industrial production is much better and consumer spending is continuing to increase, albeit slowly," said Padoan, who also rejected any talk of a 'troika' - the EU commission, ECB and International Monetary Fund - to push reforms forward.

However the news is a blow for Renzi who swept to power earlier this year and promised a raft of changes to the tax, judicial, public administration and electoral systems.

To date, however, he has only managed some income tax cuts and become mired in a fight over reform of the Italian senate.

Renzi argues that this kind of constitutional reform is needed before other labour market reform can be undertaken.

The Italian PM has been among those calling the loudest for flexibility in the interpretation of the rules that govern debt and deficits in the eurozone.

However other partners and the EU commission have indicated they wanted to see more structural reform undertaken first.

The commission reiterated this on Wednesday and noted that Italy had already been told that it should stick to its budget plans.

The other leader calling for flexibility and support from its EU partners is France's Francois Hollande.

In an interview with Le Monde recently, the French president urged Germany and the European Central Bank to do more to boost growth.

However he was firmly rebuffed on Wednesday.

A German government spokesperson said that the "very general declarations" from Paris did not supply any reason to change economic policy.

"Germany is already an important engine, even the most important, for growth in the eurozone," said the spokesperson.

Hollande is also struggling to push through structural reforms and has already been given two year's grace - from 2013 to 2015 - to bring his country deficit in line with euro rules but is on course to miss the target once more next year.

Meanwhile amid the bad news for the eurozone's second and third largest economies, one bailed-out country, Ireland, published a positive outlook.

The country’s economy is expected to expand by 3.4 percent this year, according to data published by the Economic and Social Research Institute (ESRI).

Ireland received a bailout in 2010 and exited it in late 2013 having undergone years of harsh austerity in return for the loans.

New EU rules on financial products in limbo

A feud between MEPs and the EU commission is threatening to derail financial services regulation that would protect consumers from misleading investment products.

Stakeholders' Highlights

  1. Counter BalanceWhy the Investment Plan for Europe Does not Drive the Sustainable Energy Transition
  2. Nordic Council of MinistersThe Nordic Region Seeks to Make Its Voice Heard in the World
  3. Taipei EU OfficeCountries Voice Support for Taiwan's Participation in ICAO
  4. World VisionNew Tool Measuring Government Efforts to Protect Children Released
  5. GoogleDid You Know Europe's Largest Dinosaur Gallery Is in Brussels? Check It Out Now
  6. IPHRHuman Rights in Uzbekistan After Karimov - Joint Statement
  7. CISPECloud Infrastructure Providers Unveil Data Protection Code of Conduct
  8. EFAMessages of Hope From the Basque Country and Galicia
  9. Access NowDigital Rights Heroes and Villains. See Who Protects Your Rights, Who Wants to Take Them Away
  10. EJCAppalled by Recommendation to Remove Hamas From EU Terrorism Watch List
  11. GoogleBringing Education to Refugees in Lebanon With the Clooney Foundation for Justice
  12. Belgrade Security ForumCan Democracy Survive Global Disorder?