| ROME, April 26
ROME, April 26 Italian business confidence fell
unexpectedly to its lowest level in two and a half years on
Thursday as austerity measures at home and in the euro zone
weighed on consumer spending.
After rising slightly in March, business morale for April in
the euro zone's third-biggest economy fell to a seasonally
adjusted 89.5, the lowest since October 2009, statistics office
A Reuters survey of analysts had forecast the index would be
flat at last month's original reading of 92.1. ISTAT said
March's reading was revised down to 91.1.
Falling business morale is an ill omen for the second
quarter. The index closely tracks Italian growth and is evidence
of the depressive effects of the Europe-wide push for fiscal
austerity as a remedy for the euro zone debt crisis.
"Italian austerity is hurting domestic demand, and austerity
in the rest of Europe is hurting exports," said Paolo Pizzoli,
senior economist at ING Financial Markets in Milan.
Last year, 57 percent of Italian exports were to European
Union partners, Pizzoli said.
In November, Prime Minister Mario Monti took charge of an
unelected government of technocrats after Silvio Berlusconi
stepped down amid a sex scandal and a spiralling debt crisis
that had already forced Greece, Ireland and Portugal to seek
bailouts and impose austerity.
Monti immediately passed a tough belt-tightening package
that included a major pension overhaul and 24 billion euros in
tax increases for this year alone.
The phasing in of Monti's new taxes combined with the pangs
of the recession are hurting the premier's popularity. His
ratings fell four percentage points to 51 percent in April, from
a high of 62 percent in January, an IPR Marketing poll showed on
Confidence in the government fell 5 percentage points to 45
percent, down from a high of 55 percent in January, the poll
The Italian manufacturers surveyed by ISTAT during the first
half of the month indicated that their orders, both foreign and
domestic, remained low, and their expectations for production in
the next three months fell.
Italy won't pull out of recession until the second quarter
of next year, according to a Reuters poll of analysts published
Bond yields for peripheral euro zone countries including
Italy again are rising even though 25 EU leaders signed a
stringent "fiscal pact", or budget discipline treaty, in March,
and as elections in France and Greece loom.
Monti on Thursday backed a call to reorientate the EU's sick
economy towards growth, saying that concentrating on budgetary
discipline alone could leave the continent in a prolonged slump.
At a European level, the focus is turning to
growth from austerity, Pizzoli said.
"The deteriorating economic cycle increases pressure to
shift the focus to growth, and it looks like this is a view that
is increasingly shared at a European level," the ING economist
European Central Bank President Mario Draghi on Wednesday
said the region should follow its fiscal treaty with a "growth
compact", and Socialist Francois Hollande, favourite to take the
French presidency next month, has called for the ECB's mandate
to be revised to add a responsibility for promoting growth.
Italy's Monti, an economist and two-time European
commissioner, has embraced the new focus on growth.
"Europe needs policies that raise potential growth rates,"
Monti said at a business conference in Brussels on Thursday.
"Italy was the first country to highlight the need to put
growth on the European agenda," he said.