There was no growth at all in the economy of Italy for the third quarter of the current year as all economic activity came to a virtual standstill during the quarter.
This development in the country assumes importance because the recently elected new coalition government of the country is at logger heads with the European Commission over the budget proposal for next year. The budget deficit as proposed by the Italian government is higher than that of last year as the Italian government bows down to domestic pressure to spend more on public services and infrastructure which would potentially also boost growth.
But the Commission says that this violates the EU rule that mandates that all member states of the block should strive to progressively reduce its budget deficit till a balanced budget is achieved. The Commission rejected the proposed Italian budget last week and give the Italian government three weeks time to come up with another budget proposal that meets the EU rules.
Even as the Italian economy caused concerns in some quarters of the European Union, the most recent figures from the block suggest that that there was a slowdown of economic growth to tan extent that was lower than expected for the 19 countries hat use of the euro currency.
Eurozone growth slowed to 0.2%, from 0.4% in the previous quarter.
There was also a slowdown in the economic growth for all 28 member states of the European Union for the quarter 0.5 per cent in the previous quarter to 0.3 per cent.
The expansionary 2019 budget as proposed by the Italian government is justified by the zero growth in Italy, said Italian Prime Minister Giuseppe Conte and complained that the budget that would have boosted growth has been rejected by the European Commission because it breaks EU rules.
He said on Facebook; “The slowing GDP is another reason to go full steam ahead with the budget.”
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: “This is a sobering number for the new government, though we suspect that it will meet it with fighting talk, at least initially.
“After all, with growth now stalling, fiscal stimulus is needed more than ever, or so at least the argument will go in Rome.”
On the other hand, there was a pick up in the French economy driven by increase in consumer spending, according to data from the French statistics agency INSEE. But while the growth was in the third quarter registered a 0.4 per cent compared to a 0.3 per cent growth in the previous quarter, the rate of growth was lower than that forecast by analysts. This is also indicative that the French government could be set to miss the growth targets for the full tear.
Economic sentiment dropped in the eurozone for the 10th consecutive month, the European Commission said in a separate statement.
(Adapted from BBC.com)