Abstract
This 2006 Article IV Consultation highlights that Italy’s economy is enjoying a broad-based, if comparatively modest, cyclical upswing. Output is estimated to have grown by 1¾ percent in 2006—the strongest pace since the beginning of the decade. Inflation is close to that of the euro area, financial conditions are favorable, unemployment is falling, and the current account deficit is moderate. Some progress has been made on broad-based structural reform. Recent initiatives in labor contracting envision a partial rollback of earlier liberalizing reforms.
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