Italy’s GDP worse than forecast

Yields on Italian 10-year bonds will keep under tension after the latest economic data brought investors a negative surprise. The country’s GDP suffered a further contraction of -2.5 percent year on year in the second quarter of 2012: the previous figure had been -1.4 percent and market expectations had pointed at -2.3 percent.

Industrial production played a major role, with a -7.9 percent year on year rate that was 2.4 percentage points worse than in the first quarter of the year. Investment in capital goods dropped, too, by -7.6 percent.

So what’s holding yields over the 6 percent zone? (8 percent is the common denominator of the three euro country members that have had to enter into a bailout programme). For a change in the euro scenario, it could be the politics. Italy’s prime minister Mario Monti just won a parliamentary confidence vote, which should give him a speedy ticket to introduce more austerity measures.

Budget cuts this year will be of some moderated €4.5 billion, but in 2013 they are supposed to amount to €10.9 billion and €11.7 billion in 2014. In 2013, the Italian government is also set to raise VAT rates. The markets are watching.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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