Italy recovery stalls, threatening debt plan

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Rome (AFP)

Italy's recovery from recession virtually stalled towards the end of 2015, complicating Italian efforts at debt reduction, worse-than-anticipated growth figures indicated Friday.

National statistics body Istat said total GDP for 2015 was up 0.7 percent on the previous year.

The Bank of Italy had last month forecast an expansion of 0.8 percent for 2015 with growth accelerating to 1.5 percent in both this year and 2017, broadly in line with the government's figures.

Istat said GDP expanded by only 0.1 percent from the third to the fourth quarter of last year.

That produced an annualised rate of one percent in the final three months of the year, significantly below most analysts' predictions of quarterly growth around 0.3 percent and an annual rate closer to 1.2 percent.

Slower-than-anticipated growth could threaten Italy's pledge to start reducing its 2.2 trillion debt mountain this year and exacerbate festering tensions with Brussels over economic policy.

Prime Minister Matteo Renzi defied the European Commission's advice at the end of last year by pushing through a tax-cutting expansionary budget which means Italy's deficit will be reduced at a slower pace than previously agreed.

The government's projected deficit of 2.2 percent of GDP is well under the ceiling of three percent set in the EU's Stability Pact.

But economists have warned that any slippage could push back the point at which the country's debt, equivalent to more than 130 percent of GDP, begins to fall.

Renzi has regularly derided what he sees as the EU's misplaced emphasis on 'austerity' economics, arguing that the focus should be on bolstering demand to stimulate growth rather than cutting spending.

This week alone has seen him compare the EU to both a sinking ship and to a doctor administering useless drugs to a terminally ill patient.