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Italy Gets Boost To Consumer Confidence

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Italy Gets Boost To Consumer Confidence

The Italian Consumer Confidence number for April has just come in at 105.4, this represents a healthy pick up on the previous months revised reading of 101.9, there is a positive surprise element contained in this print as markets were anticipating a fall off in the confidence number to just 101.5.

This is a pivotal confidence reading for the Italian economy which is at the brink. The new centre left government is struggling to implement reform measures and today’s upbeat sentiment figure will provide some breathing space both domestically and in the wider global context for Matteo Renzi’s new Government.

Italy is suffering many of the same issues as it’s European peers, unemployment is above 13% and GDP growth for all intents and purposes is effectively zero. Italy’s true problem however is the level of public debt, this is currently running at over 132% of GDP and rising.

The now imminent quantitative easing action by the European Central Bank (ECB) is compressing Government bond yields across the Eurozone, this is a side effect of the over active primary market and Italy, like other nations is taking the opportunity to stockpile cash in this favourable environment.

The new Italian Government has pledged both tax cuts and increased spending as a means to stimulate the economy. This is a gamble, in the short term a further run up in Italy’s debt levels will be inevitable in order fund this expansionary policy. This is why the confidence readings are so important, a leap of faith is required from the markets, and this is asking a lot. Should the gamble fail there is no certainty that a safety net will be provided. The shear size of the Italian economy means that unlike Ireland, Greece and Portugal, it will prove extremely difficult for the ECB/EU/IMF troika to put together a bailout package for the Eurozones third largest economy.

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