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Mark Gilbert

Italy Needs a Cure for Its Bad-Debt Headache

Non-performing loans risk smothering Italy's nascent recovery.
A drag on growth.

A drag on growth.

Photographer: Alessia Pierdomenico/Bloomberg

Italy's economy dragged itself out of recession this year, posting annual growth in gross domestic product of 0.8 percent in the third quarter. That, though, was only half the pace achieved by the euro zone as a whole. And unless the Italian government gets serious about tackling the bad debts that are crushing the nation's banking system, its economy will continue to underperform its peers.

Economists surveyed by Bloomberg News are only mildly optimistic about Italy's prospects next year. The consensus forecast is that growth will peak at 1.3 percent this quarter, slowing for the first three quarters of next year before rallying back to that high by the end of the year: