New growth numbers confirm Italy's economy as stagnant - putting an unwelcome spotlight on Italian prime minister Matteo Renzi's contentious programme of reforms as he heads towards a make-or-break referendum in October, while also struggling with the aftermath of last month's devastating earthquake. Ivor Bennett reports.
The faultline from last month's earthquake in Italy stretches 25 kilometres. The region's economy could soon be equally scarred. Initial estimates putting the damage at over 10 billion dollars. SOUNDBITE (English) CHRIS BEAUCHAMP, SENIOR MARKET ANALYST, IG, SAYING: "We can start to see the effect being played out in a number of areas - business confidence, business activity, consumer confidence as well. And again, it's just another bit of pressure on the Italian government to try to find some sort of path through this economic mess and try to get the economy moving again." The latest figures confirm the sedentary posture. Zero growth in the second quarter While manufacturing contracted in August for the first time in more than 18 months. Prime Minister Matteo Renzi insists deficit spending and tax cuts are the answer. but Europe's budget hawks may take some convincing, with Italy already warning it'll miss this year's deficit target. SOUNDBITE (English) CHRIS BEAUCHAMP, SENIOR MARKET ANALYST, IG, SAYING: "Tax breaks could lead to the kind of increases in investment that could get the economy moving again. He's taking a leaf out of Ireland's book. Although that method may not be too popular with the European commission at the moment. but I think any sign of imagination with the Italian government is welcome right about now." It certainly seemed that way during talks with Angela Merkel earlier this week. The German chancellor hinting at more flexibility in light of post-quake spending. Likely to be less exciting, Renzi's upcoming referendum on constitutional reforms. SOUNDBITE (English) CHRIS BEAUCHAMP, SENIOR MARKET ANALYST, IG, SAYING: "Immediately after the Brexit vote, it was told that this was the next bump in the road for the European Union - if he loses, if he decides to go. So it is, perhaps, something that Brussels and Berlin would undoubtedly prefer to do without." Having staked his credibility on reviving the economy, Renzi is reluctant to back down. Even though he does now concede it's as much of a dream as a nightmare.