Italian industrial production fell more than expected in May from the month before, national statistics bureau ISTAT has reported, as the country's weak economic growth continues to stutter. As Sonia Legg reports, the health of Italy's banks is also a worry.
It was banks last week - now it's Italy's industrial output that's raising eyebrows. Production - according to the national statistics bureau - fell 0.6 percent in May, half a percent more than expected. That's bad news for a country which only emerged from recession at the start of 2015 and is currently dealing with a banking crisis (SOUNDBITE) (English) CITY INDEX, MARKET ANALYST, KEN ODELUNG, SAYING: "Growth was already weak before we had the most recent upsurge in angst about the banking sector particularly. It's difficult to see how the economy can make progress and how investment can regain confidence without some sort of breaking of the impasse." Italy's banks are saddled with 360 billion euros of bad loans. The drop in their share price after the Brexit vote added urgency to talks talking place in Brussels. (SOUNDBITE) (English) CITY INDEX, MARKET ANALYST, KEN ODELUNG, SAYING: "It looks very, very likely that some form of recapitalisation is going to take place. Knowing what we know about the financial culture and the way that interludes with the consumer we know that could actually stoke political destabilisation further IN Italy and that's something that would rankle greatly with both the political establishment in Italy and in the euro zone itself." Official growth predictions for the full year still stand at 1.2 percent. But ministers have admitted that's likely to be revised down due to the repercussions from the Brexit vote.