The Italian economy continues to disappoint
Head of Macro Analysis
Summary: Italy's latest quarterly GDP numbers show that the economy is in far worse shape than most people thought.
We have warned many times that the European economy is in worse shape than is generally thought, especially in Italy. All leading indicators are pointing down: The Bank of Italy coincident indicator, which leads industrial production by four months, is close to zero and Italy credit impulse has been in contraction all year long.
The risk of an escalation in tensions between Rome and Brussels is limited. It seems more and more obvious that Italy will slightly lower its overoptimistic growth forecasts and proposes a mechanism to avoid pushing the deficit beyond the permitted limits.
It is in the interest of the European Commission and Italy to find a middle ground. Italy still has a few weeks left to offer some input or modifications before Brussels issues its formal opinion, which is due on November 30.
An agreement is necessary because first, Italy needs very favourable market conditions to face the massive maturity wall that will reach about €300bn in refinancing in 2019 and second, the European Commission cannot countenance a political crisis with a member state that would fuel populist movements ahead of the European Parliament elections next May.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)