IMF: Italy faces two lost decades

The third largest economy has been struggling for a long time...

IMF: Italy faces two lost decades

Nick Potts / EMPICS Sport

The International Monetary Fund's (IMF) annual report on the Italian economy says that the state is in the middle of what will be a two-decade long period of stagnation.

The IMF believes that it will not fully shake-off the effects of the 2008 crash until the mid 2020's.

The report added that the process will be "prolonged and subject to risks."

The Washington-based institution believes that Brexit volatility, a global trade slowdown, influxes of asylum seekers, and security risks all "further complicate policymaking."

"If downside risks were to materialise, regional and global spillovers could be significant, given Italy’s systemic weight," the report added.

In Italian banks 18% of loans are classified as 'non-performing.'

Outside of banking, the economy is also hit by low productivity, poor investment growth, 11% unemployment, and national debt of 133% of its GDP.

Yesterday, Eurogroup president, Jeroen Dijsselbloem has said that Italy's banking sector will be dealt with "gradually" and that its current difficulties do not amount to an "acute crisis."

Mr Dijsselbloem stressed the need for Euro states to respect the "strict" new rules which have been introduced to require creditors to take losses before public money can be put into banks.

"There have always been, and will always be, bankers who say we need more public money to recapitalise our banks, and I will resist that very strongly, because again and again it’s hitting on the taxpayer, again and again increasing sovereign debt in countries that are heavily indebted," the Dutch representative told the media.

His comments come amid threats from Italy to sidestep EU regulations to pump billions of euros into its faltering banking system - this would break the EU's rules on assisting struggling banks.

The values of bank stocks in Italy have plummeted by more than one-third since the UK decided to leave the EU. The sector has been considered vulnerable for some time and investors fear negative findings when the results of stress tests are published later in this month.