A long stalemate since Italy's inconclusive election has left government departments in Rome becalmed until a new administration arrives and powerless to respond to increasingly desperate calls for action from business leaders. More than 40 days have passed since the parliamentary election, with rival centre-left and centre-right leaders Pier Luigi Bersani and Silvio Berlusconi and the populist 5-Star Movement led by ex-comic Beppe Grillo no closer to an accord that would allow a government to be formed.
Although bond markets have not fallen into panic as many had feared, hopes have been shelved of any early attack on problems ranging from slashing bureaucracy and overhauling the cumbersome public administration to boosting employment among the young. Italy's economy is falling ever deeper into recession and public finance targets have begun to slip, with the 2013 budget deficit now expected to scrape in just under the European Union limit of 3 percent of gross domestic product.
The government has slashed its forecasts and now expects the economy to contract by 1.3 percent this year, and officials say even that target is optimistic, meaning unemployment will continue to rise and efforts to cut the 2 trillion euro ($2.6 trillion) public debt will falter. The situation facing companies is worsening. More than 12,400 went out of business last year, 33 percent more than in 2009, according to business information provider Cribis D&B. In the last quarter of 2012 dismissals were up 15.1 percent from the same period of the year before, according to Labour Ministry data.