Italian economy shrinking again

The figures will not make pretty reading for Silvio Berlusconi

The Italian economy has suffered its second quarter of negative growth in the past nine months, raising the prospect of it going into recession.

Output shrank 0.3% in the second quarter, the weakest three-month performance for nearly five years, according to official figures.

But Italy is not yet officially in recession as this requires there to be two consecutive negative quarters.

Its economy grew 0.5% in the first quarter of 2008.

'Setting the tone'

Friday's figures paint a gloomy picture of the state of the eurozone's third-largest economy.

Economists said the figures illustrated the rapid slowdown in economic activity across the eurozone, triggered by a combination of the global credit crisis, US economic weakness and rising inflation.

It is not very surprising given the structural weakness of the Italian economy Susana Garcia, Deutsche Bank

Estimates for second quarter growth across the 15-member single currency bloc will be published next week, with some experts forecasting an overall contraction.

Several European countries, including Denmark and Ireland, are already either in recession or teetering on the brink of it.

The Italian economy has been hampered for some time by poor productivity, labour unrest and political instability.

"It is not very surprising given the structural weakness of the Italian economy," Deutsche Bank's Susana Garcia said of the latest figures.

"It sort of sets the tone for the rest of the eurozone."