Italy

Italy’s political tensions with the European Union and the accompanying financial jitters are beginning to take a toll on the Italian economy, the latest data suggest. Italy’s unemployment rate ticked up to 10.1% in September from 9.8% the previous month, the country’s statistics agency said Wednesday, reversing a downward trend throughout this year, The Wall Street Journal reported. And on Tuesday, the statistics agency said gross domestic product was unchanged in the third quarter from the second, the worst showing in almost four years, while business confidence fell in October.

Italy’s political tensions with the European Union and the accompanying financial jitters are beginning to take a toll on the Italian economy, the latest data suggest. Italy’s unemployment rate ticked up to 10.1% in September from 9.8% the previous month, the country’s statistics agency said Wednesday, reversing a downward trend throughout this year, The Wall Street Journal reported. And on Tuesday, the statistics agency said gross domestic product was unchanged in the third quarter from the second, the worst showing in almost four years, while business confidence fell in October.

Italy’s economy came to a standstill in the third quarter, with gross domestic product failing to tick up from the previous period, amid political tumult and volatility in the country’s financial markets, the Financial Times reported. GDP was flat in the July to September period, the worst performance since the fourth quarter of 2014, according to official data from the Italian National Institute of Statistics. It was expected to expand 0.1 per cent, according to a poll conducted by Reuters, from a rise of 0.2 per cent in the previous quarter.

Major companies on Tuesday ruled out involvement in a new rescue of Alitalia, complicating a plan led by Rome in which state-controlled railway Ferrovie dello Stato (FS) will bid for the airline and look to bring in partners, Reuters reported. Alitalia was put under special administration last year, leaving the government once again seeking a buyer to save the carrier. It will be the airline’s third rescue in a decade. FS said its board had decided to put in an offer to buy Alitalia, but gave no further details.

The board of Italy’s state-owned railway operator will meet on Monday afternoon to discuss an offer for the whole of national carrier Alitalia, a source close to the matter said. Any offer by railway group Ferrovie dello Stato (FS) will be subject to series of conditions, including finding an industrial partner, the source said. Once a major player in the European airline industry, Alitalia has suffered in the face of competition from high-speed trains and low-cost carriers in recent years, eroding its market share and denting its profits, Reuters reported.

Europe’s leaders have come down hard on Italy for its plans to increase spending with the aim of boosting growth and helping the poor. What they fail to recognize is that a little stimulus might be just what the Italian economy needs, a Bloomberg View reported. The outlook for the global economy is deteriorating more rapidly than forecasters realize. A slowdown in China has hit global trade, European exports are decelerating, and euro-area business sentiment is sharply down.

Italy's banks are charging households and businesses more to borrow after a fall in the value of the country's bonds, the first sign of a credit tightening that could disrupt the populist government's economic revival plans, the International New York Times reported on a Reuters story. Investors have been dumping Italian assets since the formation in June of a coalition government whose draft 2019 budget plan this month prompted Moody's to cut Italy's credit rating and the European Commission to demand a revision.

The European Commission has rejected Italy’s draft budget. Valdis Dombrovskis, the commission’s vice-president responsible for the euro, said this week that Rome’s arguments for increasing its fiscal deficit were “not convincing,” the Financial Times reported. The Italians had been warned. But the Five Star/League coalition government nevertheless decided to pursue a fiscal expansion instead of the adjustment prescribed by European rules.

Brussels has rejected Italy’s draft budget in an unprecedented move that threatens to deepen rifts between the European Commission and the populist government in Rome, the Financial Times reported. Valdis Dombrovskis, the commission’s vice-president responsible for the euro, said Brussels had “no alternative” but to demand changes, after Rome defied warnings that its plans for a wider deficit would smash EU fiscal rules and flout the country’s previous commitments. The move is the first time Brussels has refused to endorse an EU member state’s draft budget.

The price of Italian government debt has risen after the country’s government rebuffed a rebuke from Brussels over its spending plans but pledged not to expand the country’s deficit further after next year, the Financial Times reported. The yield on 10-year Italian government bonds dipped by 5 basis points to 3.41 per cent, extending a fall of 12 bps prior to the release of the statement. It was briefly down almost 30 bps just after the opening of trade. Its spread over the equivalent German Bund - a widely watched indicator of eurozone political tension - fell by 7 bps, to 293 bps.