Italy is looking at a deeper recession which is a result of  business activities crumbling as Europe’s fourth-largest economy and its subsequent exchange traded fund (ETF) are dragged further downward.

Italian business confidence fell from 71.6 in Nov. to 66.6, its lowest level since index began in 1991, as contagious pessimism rampages through company outlook for orders and production, reports Sofia Celeste for The Wall Street Journal.

The drop further indicates economists’ view that the Italian GDP may fall as low as 2.4% in 2009, which may be Italy’s worst recession experienced since World War II.

The strain of the international financial crisis has Italy’s companies continuing to cite difficulty in garnering bank loans as banks ignore the Italian government and central bank call for continued lending.

The Prime Minister, Silvio Berlusconi, is expected to change the GDP forecast from +0.5% to -1% for 2009.

Without bright prospects, Italy and its ETF, iShares MSCI Italy Index Fund (EWI), which ended 2008 down 46.8% year-to-date, may have to brace for a long recession.

ETF EWI performance

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