Italy, Germany economies stagnating
(14 August 2016 – Europe) Italy's economy failed to grow in the quarter ending June, as the country struggled with a failing banking sector.
GDP growth shrank to 0 percent in the second quarter compared to 0.3 percent in the first quarter, and below analysts expectations of 0.1 to 0.3 percent.
Meanwhile, Germany's economy expanded by just 0.4 percent, down from 0.7 percent in the first quarter.
Overall, a second estimate of GDP across the eurozone confirmed that growth halved to 0.3 percent from 0.6 percent in the first three months of the year.
GDP also fell across the 28-nation European Union to 0.4 percent from 0.5 percent between the first and second quarters.
Italian Prime Minister Mario Renzi, is battling to reduce the bad debt in its banking sector, which is currently buried under €360 billion (A$525 billion) worth of bad loans. Monte dei Paschi di Siena, Italy's third largest bank and the world's oldest lender, is saddled with €46.9 billion of bad debt.
Alberto Bagnai, economic policy professor at the University of Chieti-Pescara, said: "There is no way to solve the banking problem without economic growth. If the whole nation doesn't start earning more it can't pay back its debts - public or private."
The government expects the country to grow by 1.2 percent this year. However, the International Monetary Fund recently reduced its economic growth from 1.1 percent to 1 percent.
In Germany, exports and consumer spending were stronger than forecast but investment in construction and machinery slowed.
New data also revealed that German inflation rose in July, up by 0.4 percent, fuelled by rising food and services prices.
Inflation was tempered by the falling cost of energy and clothing. Destatis, Germany's statistics office, said stripping out energy, inflation would have been 1.3 percent in July.
Subscribe