Italy confirms it is in recession

MILAN—Heavily indebted Italy fell into recession late last year when the economy contracted by 0.7 percent from output in the previous three-month period, the national statistics institute said on Monday, confirming an earlier estimate.

Coming on the heels of a 0.2-percent drop in the third quarter, the data met the official definition for recession of two quarterly declines of output in a row.

Italy has the third-biggest economy in the eurozone after those of Germany and France.

On a 12-month basis, Italian gross domestic product (GDP) slipped by 0.4 percent in the final three months of 2011, slightly better than an initial estimate of minus 0.5 percent, figures from the Istat institute showed.

For 2011 as a whole, however, business activity gained 0.5 percent, Istat said, revising an earlier estimate of 0.4 percent growth slightly upwards.

Italy is burdened by massive debt of 1.9 trillion euros, equivalent to 120.1 percent of GDP, and has drawn up several austerity plans since 2010 to reassure financial markets.

The government forecasts an economic contraction of 0.4 percent for 2012 as a whole, mainly owing to austerity measures that curb domestic consumption and investment.

The European Commission believes that Italian business activity will shrink by 1.3 percent his year however, while the International Monetary Fund has forecast a decline of 2.2 percent.