Italy slides into recession, darkening Europe’s outlook

MILAN — Italy has fallen back into recession, intensifying concerns about the 19-country eurozone economy and a possible flare-up in the debt market jitters that haunted the bloc in recent years.

The Italian economy, the third-largest in the eurozone, contracted by a quarterly rate of 0.2 percent in the fourth quarter of 2018, the national statistics agency said.

Following a 0.1 percent drop in the previous three-month period that means Italy is in a technical recession, defined as two straight quarters of economic contraction — just four years after its last one.

Italy’s recession is one reason why the wider eurozone slowed in 2018, along with uncertainties related to Brexit, the China-U.S. trade spat and new vehicle emissions standards.

Though the eurozone is performing better than in the dark days of the debt crisis, which threatened to break up the euro currency, it’s still lagging the U.S. economy, which is projected to have grown about 3 percent in 2018. As a result, unemployment in the eurozone is about double the U.S.’s 4 percent at 7.9 percent.

The eurozone economy as a whole grew by a meager 0.2 percent in the final quarter, the same as in the previous quarter, according to provisional figures released Thursday by the Eurostat statistics agency.

It expanded by 1.8 percent in 2018 overall, its weakest rate in four years. That’s lower than had been anticipated a year ago, when the bloc was expected to slow only slightly from 2017’s strong 2.4 percent rate.

The Italian economy has become an acute source of concern over the past few months, partly as a result of the new populist government’s spat with the European Union’s executive commission over its budget plans,

which has undermined business confidence and seen Italian borrowing rates in bond markets spike higher.

The EU Commission has insisted that the Italian government rein back on its spending plans lest it loses control of its budget and the faith of bond market investors.

Though most economists think the budget impasse with the commission has undermined confidence in the Italian economy, the country’s premier, Giuseppe Conte, sought to downplay the recession and placed the blame firmly on the trade spat between the U.S. and China, which he says has weighed on Italian exports.

“This is a transitory factor,” he told reporters in Rome.

The head of Italy’s UNC consumer advocate organization, Massimiliano Dona, said the weak figures raise questions over the Italian government’s prediction that the economy will grow by 1 percent in 2019. He said that could mean the government will have to adjust its spending plans.

Italy hasn’t been the only reason why the eurozone slowed in 2019. Germany, Europe’s biggest economy, suffered an unexpected contraction in the third quarter largely due to changes in emissions standards that hurt auto sales.