ITALIAN ECONOMY STALLED

Revised Istat figures shows GDP down 0. 1% in 2nd qtr

(ANSA) - Rome, September 10 - The Italian economy is in worse shape than previously expected and could be headed for a recession if GDP does not pick up in the third quarter. National statistics bureau Istat on Wednesday revised its figures for the second quarter of 2008 and said GDP fell by 0.1% over the same period the previous year, its worse year-on-year result since the third quarter of 2003, when GDP also fell by 0.1%. Last month Istat had predicted zero growth for the second quarter. Istat confirmed that GDP sank by 0.3% over the first quarter of the year, its poorest performance since the last quarter of 2007. Italian Premier Silvio Berlusconi downplayed the bad economic news and said ''I believe that I am the premier of a very solid nation with a high standard of living and of well-being''. The poor state of the Italian economy was confirmed by the European Commission which on Wednesday reduced its already modest forecast for GDP growth in 2008 to 0.1%, from 0.5% calculated last April. The EC added that the reduction ''implies that there is no impetus for growth in 2009''. According to the European Union executive, the Italian economy has been slowing down since the middle of last year ''and the outlook for the coming months is not encouraging due to a further decline in competitiveness and a drop in global demand''. The EC said it expected Italy's GDP in the third quarter to be unchanged over the second quarter but that the economy should pick up slightly in the final quarter of 2008 with a predicted decline in inflation. According to the EC, the stagnation of the Italian economy is primarily due to a decline in domestic demand brought on by a surge in consumer prices. Should Italy's year-on-year GDP fall in the third quarter, this will mean that the economy is formally in a recession. The national retailers' association Confcommercio said that the revised Istat figures ''confirm the risk of a recession, something which is already a reality for consumers''. ''Consumer spending has been falling for the past three quarters and indications are that this will get even worse, also give the results of the past season for tourism.'' the group added. ''Unless measures are adopted to boost consumer spending by increasing available income for families, the current crisis will compromise the economic picture in 2009,'' Concommercio warned. Concern over the state of the economy was echoed by leading consumer groups who said the situation was ''grave and worrisome''. ''The violent plunge ion consumer spending, caused by purchasing power at historic lows, has resulted in consequences which are clear to everyone,'' Federconsumatori and Adusbef said in a joint statement. ''On one thing I think we can all agree on to try and avoid recession and that is the need for the European Central Bank to cut interest rates by at least one percentage point,'' they added.