By Angela Monaghan, Economics Correspondent
5:40PM BST 31 May 2012
“For Italy, 2012 will inevitably be a year of recession, owing to the financial uncertainty and the drastic, but indispensable, measures to adjust the public finances,” Ignazio Visco said at a Bank of Italy meeting in Rome.
“In scenarios that are not excessively unfavourable, the fall in GDP can be kept to about 1.5 percent. An upturn could begin towards the end of the year,” he added.
The Italian government is slightly more optimistic, forecasting a 1.2pc contraction in GDP this year. The International Monetary Fund on the other hand has forecast a sharper fall of 1.9pc.
Mr Visco also backed Spain’s call for banks to be able to directly access bailout funds through the European Stability Mechanism. Under current rules the funds must be first accessed by the sovereign before being transferred to banks.
“There must be the possibility of intervening promptly in the securities markets and directly in favor of banks, with procedures that are more flexible and less penalizing for the beneficiary countries that respect the rules of the union,” he said.
Meanwhile data from Germany showed retail sales rose for a second month in April, rising by 0.6pc and beating economists’ expectations. On a 12-month basis however, sales were still 3.8pc lower.
“Consumer confidence has been holding up quite well recently at a high level,” said Greg Fuzesi, economist at JP Morgan Chase.
He added that consumer spending in Germany was likely to rise by 2pc on an annual basis in the second quarter of the year, “at least based on the data currently in hand.”
Separate data showed Germany’s unemployment rate fell to 6.7pc in May from 7pc in April, despite an escalation of the eurozone crisis.
The total number of jobless dropped 108,000 to 2.86 million, the lowest level since December.
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