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particular where a sharp drop in exports occurred against an equally sharp recovery in
imports.
On aggregate average annual GDP increased by 1.5% (+1.9% in 2010).
The trend for industrial output has been negative since September on a monthly basis (-1.1%
in December), in line with the response of key confidence indicators. Consequently the
unemployment rate, which was stable at 10% until June, rose again in the second half of the
year to 10.6% in December with very critical conditions in Spain (23.1%) and Greece (19.9% in
November).
Inflation, as measured by the harmonised consumer price index, was more volatile rising to
3% from September to November, the highest levels seen since the autumn of 2008, before
ending the year at 2.7% (2.2% twelve months before). Even net of foodstuffs, energy products,
alcohol and tobacco, the index almost doubled in the first nine months of the year, to then
stabilise at 2% (1.1% at the end of 2010) 10 .
The outlook for the euro area is affected by the tight pro-cyclical budgetary policies pursued by
many countries to balance budgets in deficit, with a possible increase in credit restrictions due
to the need for banks to recapitalise as required by the EBA and to a marked deterioration in
confidence by businesses.
Italy has been heavily affected by a confidence crisis at international level since the summer
and this made it absolutely essential to take a number of financial and legislative initiatives
which will affect Italy’s potential for future growth.
In the last quarter of the year, the Italian economy went into a technical recession with a
quarterly fall in GDP of 0.7%, after a fall of 0.2% in the previous quarter.
In 2011 output increased overall by 0.4% (+1.8% in 2010), benefiting mainly from the result
for the balance of trade, with an increase in exports and stationary imports, while investments
and inventories fell.
However, the fall recorded in the last quarter was to be expected from the performance of
industrial production (as seasonally adjusted), which after eight months of albeit modest
month-on-month growth, saw the trend reverse since September (-1.8% in December after -
4.1% in November). Industrial production remained unchanged on average over the year
compared to 2010, with decreases in almost all sectors including “Textiles” (-7.3%),
“Chemicals” (-5.8%) and “Electrical equipment ” (-4.9%), while “Fabrication of machinery and
plant” (+8.6%), “Metallurgy” (+3.9%) and “Mineral extraction” (+2.1%) were among the few to go
against the trend.
The unemployment rate, which had fallen to 7.9% in August (8.3% at the end of 2010), also
rose rapidly again to 8.9% in December with a peak of 30% for young people. This figure
increased further to 9.2% in January 2012. On the other hand a generalised reduction was
recorded in the use of state lay-off and redundancy benefits, which was greater for the
extraordinary component, with 953 million hours authorised compared to 1,203 million in
2010 (-20.8%).
On the prices front, after rising suddenly in March to around 3% and falling temporarily in
July and August, the harmonised consumer price index has accelerated sharply since
September with rises not seen since the Autumn of 2008 (3.7% in December 2011 compared
to 2.1% twelve months before), mainly a reflection of the rise in indirect taxation 11 . Average
annual inflation was 2.9% (1.6% in 2010).
The Italian balance of trade deficit totalled €24.3 billion over twelve months, an improvement
compared to €30 billion recorded in 2010 despite an increased energy deficit. The performance
by exports (+11.4%) exceeded that for imports (+8.9%) and was greater in both cases for trade
with non EU countries.
With regard to public finances, the drastic deterioration in financing conditions made further
legislative intervention necessary in November to balance government accounts for the years
2012-14, the third since July. The “Save Italy” bill 12 , passed in December, was designed to
10 The rises in energy product prices came in addition to the impact of indirect tax increases (Greece, Portugal, Ireland, Spain and
Italy) and to the statistical effects of the new treatment of seasonal products (Italy, Greece and Portugal). The maximum and
minimum inflation recorded in all the single currency countries therefore differed greatly from the average for the euro area.
11 The high volatility recorded during the year was also a result of methodological changes introduced since the beginning of the year
to the measurement of prices for seasonal products, the effects of which are more pronounced in months in which promotional
sales are concentrated and in those which immediately follow them. Comparisons with the previous year are distorted as a
consequence.
12 Decree Law No. 201 of 6 th December 2011, converted into Law No. 214 of 22 nd December 2011. According to official figures, the
legislation will generate funds of €32.1 billion in 2012, €34.8 billion in 2013 and €36.7 billion in 2014. These funds will be used to
reduce net debt by over €20 billion (1.3 percentage points of GDP) in each of the next three years, to finance a package of measures
designed to increase growth and reduce the contribution needed to contain the deficit which will come from tax and welfare reform.
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