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Italy is going from bad to worse

Italy’s GDP has shrunk for two quarters in a row,industrial production is down, and youth unemployment is up. Investors are rattled.

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Salvini is dismantling pension reforms and spending too much

"They are going in exactly the wrong direction," Lorenzo Codogno, former chief economist of the Italian treasury, told The Daily Telegraph. Italy's anti-immigration, populist government, led by Matteo Salvini of the Northern League and Luigi Di Maio of the Five Star Movement, is dismantling recent pension reforms and introducing a basic income for all.

About one in ten Italians live with serious deprivation, says Ferdinando Giugliano on Bloomberg. But theFive Star's "citizens' income" risksgetting "bogged down by its own complexity and the country's famously inefficient bureaucracy."

In addition to spending more money it doesn't have, Italy's anti-establishment government has been attacking France on various fronts in recent weeks, exacerbating political tensions in the eurozone. According to Politico, 51%of Italian voters under 45 would voteto leave the European Union in apotential referendum.

Italy's leaders have criticised everything from France's role in Libya to its stance during the migrant crisis, says the Financial Times. "Using France as a whipping boy is a helpful alternativeto bashing Brussels, which risksrattling investors."

Back in recession

Italy's poor GDP has only been a phenomenon for the last decade, says Societe Generale. Until 2006, Italy's GDP growth was broadly in line with that of Germany. Before it adopted the euro, Italy tended to let the lira fall, cut interest rates and increase government spending every time it faced a downturn. Under the single currency and Brussels' fiscal regime, these escape routes have been closed off.

ECB firepower

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