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Monti faces growing criticism over Italian economy

By Josephine McKenna (Xinhua)

09:07, June 12, 2012

ROME, June 11 (Xinhua) -- Italian entrepreneur Ennio De Vellis established a transportation and removals business just outside Rome 30 years ago.

His family had little means and the 52-year-old built his business in Frosinone "from next to nothing."

Today the diversified firm that bears his name employs 100 people and has an annual turnover of 10 million euros (12.5 million U.S. dollars) a year.

But like many Italian businessmen, De Vellis is feeling the impact of the economic crisis as Italy falls deeper into recession.

"Globalization has killed the economy," De Vellis told Xinhua. "For the past five years I have been working all day just trying to maintain my business. The politicians we have now are the worst ever."

On Monday, Milan stocks slumped and bond yields soared amid fresh concern that Italy may be the next eurozone nation to seek a bailout after Spain.

New data from the government statistics agency ISTAT showed on Monday the country's gross domestic product (GDP) slumped by 0.8 percent in the first quarter of 2012, the greatest fall in three years.

"I never look at the statistics," De Vellis said. "I prefer to look at the market. The market is down and the economy is down."

"Enthusiasm is way down and that is bad for Italians...I think the spiralling crisis is the cause."

There were also grim statistics released on Friday, showing a fall in the country's industrial output. According to ISTAT, Italy's industrial output fell by 9.2 percent in April compared to the same month in 2011, the worst year-on-year fall since November 2009.

The head of Italy's largest employers' organization Confindustria Giorgio Squinzi has urged the government to adopt urgent measures to promote growth and avoid an even worse second quarter.

Giuseppe Di Taranto, an economics professor at Luiss University in Rome, was also pessimistic and blamed the technocratic Monti government for failing to promote growth.

"If these policies continue, we will not get out of this crisis," Di Taranto said. "There are no policies for growth or investment. I am very critical of (Prime Minister Mario ) Monti."

The spread between the Italian and German benchmark 10-year bond rose 470 points on Monday, taking yields above 6 percent amid concern that the Spanish bailout would fail to stem the euro crisis.

Di Taranto, who has compared the daily bond spreads during the first 160 days of the Monti government with a similar period under his predecessor, said that spreads were much higher under the current prime minister.

"The government has done nothing about tackling sovereign debt," Di Taranto said.

In a sign of further market upheaval, Milan's FTSE index slid 2.79 percent on Monday to close at 13,070 points, making it the worst-performing market across Europe.

Economists at Italy's largest bank Unicredit predicted private consumption and investment would continue to contract in 2012.

"Going forward, we expect private consumption and investment to remain weak - with the second quarter seeing the deeper contraction," said economists Chiara Corsa and Loredana Federico in a joint statement.

"We also think that the expansion in government consumption seen in the first quarter is likely to be temporary and given the current environment of fiscal tightening, we see this component turning negative in coming quarters," they said.

"It is difficult to predict how the inventory cycle will evolve going forward, given the high degree of uncertainly surrounding the economy, but we doubt that firms will continue to deplete their inventories at such high speed for long," they said.

Retailers in Rome, Florence and other cities are feeling the impact of a decline in consumer spending.

"You really see the difference this year," a Rome clothing retailer said. "The tourists are staying away and no-one is spending."

A shopkeeper in the heart of the Renaissance city of Florence said sales at her stationery store had slumped as local customers and tourists, particularly Americans, were staying away.

"Three stores have closed in this street alone," she told Xinhua. "We are feeling the impact of the crisis here."

But Industry Minister Corrado Passera said Italy was well-placed to overcome the current financial crisis.

Speaking in Milan, Passera said that the austerity measures adopted by the government have put Italy "among the countries better placed to deal with the financial turmoil in which Europe finds itself."


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