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Italian Economy to Shrink 0.6% in 2013, Employers Say

Italy’s economy will begin recovering next year as the recession in the euro region’s third-biggest economy will be deeper than previously forecast, the head of employers’ lobby Confindustria said.

“The economy in the whole of Europe is going down and in other areas, like China, it is certainly not showing the same growth of the last few years -- this is the worrying point,” Giorgio Squinzi said in an interview in Rome today. “We are relatively optimistic because starting from next year we will probably see a recovery of the economy, and Italy should benefit from this new situation.”

Today Confindustria revised down its growth forecast for Italy, saying gross domestic product will shrink 0.6 percent in 2013, compared with a 0.3 percent contraction projected in June. The group maintained its estimate of a 2.4 percent contraction this year, twice the pace predicted by the government.

It also said Italy’s deficit will fall to 2.1 percent of GDP this year and 1.4 percent next. In June it had estimated a shortfall of 2.6 percent and 1.6 percent respectively. The country’s debt, the euro region’s second-biggest, will rise this year to 125.6 percent of GDP before peaking at 126 percent in 2013, Confindustria forecast

Italy’s economy, which entered a recession at the end of 2011, contracted for a fourth straight quarter in the three months through June as the euro-area debt crisis worsened. Still, Prime Minister Mario Monti’s austerity drive aimed at reducing the country’s deficit and containing its debt means that the country will probably meet its fiscal targets this year. Italy’s debt declined in July for the first time in five months, the Bank of Italy said in a separate report today.

‘Additional Safety’

Italy today sold three-year government bonds at the lowest rate in almost two years. That followed yesterday’s ruling by Germany’s top constitutional court that paves the way for the European Central Bank and the European rescue fund to buy bonds of nations in distress.

The employers’ lobby also said that Monti’s measures will probably allow Italy to keep its debt financing costs lower this year and avoid a full bailout.

“We hope that it will be possible not to demand further help from the European institutions,” Squinzi, who was named Confindustria’s head in March, said. “In any case, the fact that the European Central Bank is authorized and available to do this is an additional safety.”

The government forecasts that Italy’s economy will contract 1.2 percent this year and expand 0.5 percent next year.

-- With assistance from Nadine Skoczylas in Rome. Editors: Andrew Davis, Eddie Buckle

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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