Bank of Italy Governor Antonio Fazio said on Thursday Italian and European growth was likely to have slowed in the second quarter of 2004 against the first quarter.
Fazio also told the annual meeting of the Italian Banking Association (ABI) that Standard & Poor's downgrade of Italy's credit rating on Wednesday was a confirmation that state accounts were in difficulty.
"Gross domestic product, according to preliminary estimates, slowed in the second quarter, compared to the first, both in Europe and in Italy," the central banker said.
Fazio said that Italian industrial production in the second quarter continued to decline, falling 1.4 percent between the end of 2003 and June this year.
But Fazio added that the trend of the main macroeconomic variables in Italy coupled with investment plans of the country's bigger companies "indicate an acceleration of activity in the second half of the year".
Despite falling exports, Italy's economy grew 0.4 percent in the first quarter of this year compared with the last three months of 2003, with increased consumer demand and an upturn in industrial investment driving the growth.
First quarter GDP in the euro zone's third-largest economy grew 0.8 percent year-on-year, the biggest annual rise since end-2002.
Italy's quarterly growth rate was in line with Germany which also grew 0.4 percent, but still lagged the euro zone average. First quarter GDP in the 12-country area was up 0.6 percent from the previous quarter and up 1.3 percent higher year-on-year.
On public finances, Fazio said that Italy needed a credible economic policy capable of reducing the debt/GDP ratio as well as more meticulous control of state accounts.
In this sense, he added, the S&P rating downgrade "confirms the difficulty" Italy's public accounts were in.
Standard and Poor's dealt Prime Minister Silvio Berlusconi a body blow on Wednesday by downgrading Italian credit worthiness just days after he took charge of economic policy-making.
It was the first time a euro zone country has received such a downgrade and further inflamed a political crisis raging within Berlusconi's centre-right coalition.
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