Italy is taking advantage of the Cyprus crisis dominating mainstream media headlines by issuing its own bad news while no one is looking. No one, that is, except astute readers of Dareconomics.
Monti’s outgoing government revised its budget and GDP forecasts dramatically downward. GDP will shrink at a rate of 1.3% rather than 2012’s 0.2% prediction. This decrease coupled with additional spending to stimulate the economy will create a larger 2.9% budget deficit over 2012’s 1.8% forecast.
Poor Italy has been doing a great job with austerity
and all it has to show for it is a deepening recession.
In the meantime, the President of Italy is beginning discussions with Democratic Left leader Bersani to persuade him to form a government. Bunga Bunga appears to be his logical coalition partner, but Bersani has labeled him as a criminal and does not wish to allow Bunga to select the next Italian president.
If this last ditch effort to form a government fails, Italy will have no choice but to have a second round of elections as soon as possible.