Employers' confederation Confindustria on Saturday slashed its forecasts for Italy's economy and said the country faced its longest recession since World War Two. The business lobby said the euro zone's third largest economy would contract by 0.4 percent this year and by 1.0 percent in 2009, compared with its previous forecasts of -0.2 percent and -0.5 percent.
Confindustria said the European Central Bank was "shockingly behind the curve" in reducing interest rates, pointing to the ECB's decision to raise rates in July when the euro zone economy was already weakening. "Forward indicators point to a steeper decline in activity in the fourth quarter of 2008 and also a significant reduction at the start of 2009," Confindustria's research department said in a statement.
Data on Friday showed Italian growth domestic product fell 0.5 percent in the third quarter after a 0.4 percent decline in the second, thus meeting the technical definition of recession of two consecutive quarters of negative growth.
The report was entitled "the longest post-war recession". National statistics institute ISTAT said on Friday that Italy posted six consecutive quarters of negative growth between 1992 and 1993. Confindustria said that in the current crisis European governments must support demand through public investments, tax cuts on low incomes and fiscal incentives for firms to invest.