THREE TIMES BUT NO CHARM

 
 t. man hatter
The formal definition of a recession is two consecutive quarters of negative gross domestic product growth.

Well, say hello to the European Union's third largest economy, Italy. The country's national statistics office yesterday announced the Italian economy in the second quarter shrank by 0.2%. That figure followed a contraction in GDP of 0.1% in the first quarter.

More bad news came with the report that German factory orders declined at the fastest rate in three years and German 10 year bond yields dropped to a record low of 1.1% in the EU's largest economy. 

Toss in the the counter sanctions former German Chancellor Erhard Schroeder's buddy, Vladimir Putin, just winged toward the EU and the U.S. and one could postulate the squeeze is on.  

Two people this news hit hardest are European Central Bank President Mario the Dragster Draghi and Italian Prime Minister Matteo Renzi. Recall earlier this year Renzi was pushing for easing regulations that would call for more structural repairs to the infrastructure of the weaker EU members, one of which is Italy.

When you paint the building and don't repair any of the structural defects it's called a superficial face lift. In a nutshell that's been the message of reluctant European leaders all along, just paint over the blemishes with easy money and maybe they will somehow magically disappear.

Renzi's critics--and the list is growing--accuse him of political grandstanding "...instead of implementing  a critical overhaul of the  labor market and the Italian bureaucracy," according to the Financial Times. One economist noted: "Italy has been stuck in stagnation for a year after eight quarters of recession. This raises the urgency for Renzi....to deliver on the economy side and make real reforms."

This is Italy's third recession since 2008.