The Italian economy shrank more than initially estimated in the second quarter as rising exports failed to offset a continued slump in consumer demand amid the longest recession since World War II, Bloomberg reported. Gross domestic product dropped 0.3 percent from the previous three months, national statistics institute Istat said in Rome. That compares with the Aug. 6 preliminary reading of a 0.2 percent contraction. Consumer spending declined 0.4 percent, with sales abroad increasing 1.2 percent.

Banca Monte dei Paschi di Siena SpA hopes to approve a new restructuring plan, which will include a €2.5 billion capital increase to be launched in 2014, within the month, The Wall Street Journal reported. The Italian bank said Monday that its board would meet on Sept. 11 to review the new plan, which is being drafted in coordination with Italy's Economy Ministry and the Bank of Italy, and aims to comply with guidelines set down by the European Commission. Monte dei Paschi di Siena said it expects its board to approve the plan by Sept. 24.

Italy and the European Commission have agreed that Banca Monte dei Paschi di Siena will have to carry out a larger-than-expected capital hike, cut costs and reduce its large government bond holdings in order to win a EU green light for state aid, officials said on Saturday. Rome has offered 4.1 billion euros of state loans to Monte Paschi, Italy's No.3 bank, in order to prop the lender, which has a weak capital position following a derivatives scandal and big Italian bond investments.

Italy's cabinet passed a package of measures to trim public spending on Monday, undeterred by a row with Silvio Berlusconi's centre-right party that is threatening to bring down the prime minister's coalition and has rattled markets, Reuters reported. The measures included cutting funding for official cars by a fifth, reducing consultancies now valued at 1.2 billion euros per year, and a decree that will gradually convert about 150,000 temporary state administration contracts into permanent ones.

The scandal-ridden bank Monte dei Paschi di Siena reported its fifth consecutive quarterly loss on Wednesday as it struggled with the cost of a state aid package and the Italian recession, the International Herald Tribune reported. However, the second-quarter net loss of €280 million, or $373 million, represented a significant improvement over the €1.6 billion loss the bank posted a year earlier.

The Bank of Italy is quietly inspecting the finances of some of the country's top lenders, which could push some Italian banks to sell assets or take other major steps, according to a central-bank document reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed, come against a backdrop of increasing worry among regulators, investors and bank executives about the health of some of the country's lenders amid a rise in souring loans.

Cash-strapped Seat Pagine Gialle (SPG) said on Wednesday an Italian court had admitted the Italian yellow pages publisher to a "composition with creditors" procedure, which is similar to Chapter 11 bankruptcy, Retuers reported. A meeting of creditors to give their final green light to the company's debt restructuring proposals is scheduled for Jan. 30, 2014, the company said in a statement. The board of SPG approved at the end of June a debt restructuring proposal intended to reduce its consolidated debt by about 1 billion euros ($1.3 billion).

Trade unions asked the Italian government this week to promote a production alliance between Italy's two largest steel producers, ILVA and Lucchini, to help the troubled firms stave off further declines, Reuters reported. The Italian steel sector, the second largest in Europe after Germany, has been hard hit by a drop in demand that has been exacerbated by tough austerity policies. Its output contracted by more than 11 percent in May from a year before. "Only by pushing forward production integration among the largest Italian steel players can we think of getting out of this tough situation.

The board of Seat Pagine Gialle approved on Thursday a debt restructuring proposal and new strategic guidelines to relaunch the Italian yellow pages publisher, Reuters reported. In February, the heavily indebted company said it would ask creditors for a debt restructuring after conceding its interest burden and the recession had made its targets to 2015 unachievable. In a statement, Seat said the debt proposal, which will be presented for review to a court in Turin, envisages that a portion of its debt will be converted into equity and part of it reimbursed with cash.

Italian Prime Minister Enrico Letta unveiled a package of measures aimed at bringing down Italy's spiraling youth unemployment—among the highest in Europe—fulfilling one of the signature promises of his shaky government, The Wall Street Journal reported. With the measures introduced on Wednesday, Mr. Letta hopes to persuade the European Union at a summit this week to grant Italy new tools that could help it boost growth and employment. The stakes are high, with pressure building on Mr.