Increased spending by every government is becoming the leitmotif of the recession. In an attempt to boost Italy’s economy and related exchange traded fund (ETF), the government has crossed into a deeper shade of red.

Bank of Italy Governor Mario Draghi says Italy’s economy will take a minimum of four years to rebound to 2007 levels, and public debt and deficits will continue to skyrocket in the meantime, writes Christopher Emsden for The Wall Street Journal. The government could begin to run a primary deficit (budget spending before interest payments on public debt) for the first time in 18 years.

One key point Draghi insists on is a crackdown on tax evasion. Istat, the Italian government statistics agency, calculates that 16% of Italian GDP is in the untaxed informal sector.

In an attempt to safeguard businesses, Draghi urged the government to lower tax rates on workers and businesses, reports Paolo Biondi for Reuters. But this suggestion may fall on deaf ears as Italy labors under the highest debt in the euro zone and third highest in the world.

The Italian research institute Isae calculates Italy’s economy will shrink by 5.3% this year, twice previous forecasts, reports Steve Scherer for Bloomberg. Italy, Europe’s 4th largest economy, could see a 0.2% growth next year.

  • iShares MSCI Italy Index (EWI): up 7.3% year-to-date


For more information on Italy, visit our Italy category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.