Italy has fallen back into recession after the country's gross domestic product (GDP) shrank 0.2 per cent in the second quarter of the year.
Latest official figures have revealed that the nation's economy has contracted for two consecutive quarters and has been compounded with the latest GDP announcement. It is the third time Italy has entered recession since 2008 and puts increased pressure on prime minister Matteo Renzi to come through on his promise of reforms.
Italy has endured some tough economic conditions over recent years and has only posted one quarter of growth since mid-2011, a 0.1 per cent increase in late 2013. According to figures from statistics agency ISTAT, the nation's GDP is now at its lowest rate for 14 years.
As pressure grows on Mr Renzi, economy minister Pier Carlo Padoan rejected notions that the government would need to pass an emergency budget to ensure the country respected European Union deficit rules. It comes after Italy was showing signs of recovery, growing gradually in the last three months but the unexpected drop in GDP has set it back once again.
Speaking to the BBC, Hetal Mehta, European economist with Legal & General Investment Management, said: "If you compare it [Italy] to a country like Spain, which underwent a huge amount of austerity but at the same time carried out labour market reforms, Italy … hasn't done as much and you see the difference in growth rates that are starting to come through."
Since the global economic crisis of 2008, Italy has been one of the countries that has been highlighted for a potential bailout. In June 2013, Mediobanca, Italy's second largest bank, warned that the country may require a bailout in just six months' time. The bank stated that its "index of solvency risk" highlighted the risk the country was in and that it could potentially slip back into recession.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.