Italy re-enters recession

<p>The Italian economy has fallen back into recession.</p>

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.

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