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Business Confidence Falls to Two-Year Low Amid Italian Austerity Measures

Italian business confidence (ITBCI) fell to the lowest in two years in December as the economy probably entered its fourth recession in the last decade amid a wave of austerity measures designed to fight the sovereign debt crisis.

The manufacturing-sentiment index dropped to 92.5, the lowest since December 2009, from a revised 94 in November, Rome- based national statistics institute Istat said today. Economists had predicted a reading of 93.7, according to the median of 14 estimates (ITBCI) in a Bloomberg News survey. Istat originally reported a confidence reading of 94.4 in November.

The mood among executives mirrors Italian consumers’ pessimism as Prime Minister Mario Monti implements a 30 billion- euro ($39 billion) package of spending cuts and tax increases. Italian consumer confidence fell in December to the lowest in 16 years and the economy shrank in the third quarter. The government forecasts a further contraction in the current three- month period, meaning Italy is in its fourth recession since 2001.

The euro-area’s third biggest economy won’t return to growth until the second half of next year, employers’ lobby Confindustria said in a Dec. 15 report. The $2.3 trillion economy will contract 1.6 percent in 2012 after growing 0.5 percent this year, the lobby said.

Fiat SpA, Italy’s biggest manufacturer, will shutter its Termini Imerese factory in Sicily at the end of the month, making it the first European automaker to close a plant since General Motors Co. shut a facility in Belgium in 2010. Fiat agreed with unions to pay about 21 million euros ($27 million) to support early retirement for about 640 workers.

Monti, who took office last month as head of an unelected government of non-politicians, is seeking to show investors he can tame Italy’s 1.9 trillion-euro debt, which is bigger than that of Spain, Greece, Portugal and Ireland combined.

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