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Italy could soon have populist parties in power — and experts are warning of the damage it could cause

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“They want a fight with Brussels,” he said, regarding the two parties’ idea to change EU rules that state member countries should not go over a 3 percent government deficit. Both the Five Star movement and Lega want to increase public spending.

Piccoli added that the concern is not so much that the parties want to spend more, but how they are going to spend the money.

Most analysts expect that the new government will not be in place for a very long time, limiting its ability to actually make any significant changes to the Italian economy.

There will be “some damage on the fiscal side, but given the short time frame, the lack of experience, they never worked together, their ability to put Italy in a difficult spot is somewhat limited,” Piccoli added.

Meanwhile, Rabobank analysts said in a note Friday that if the Five Star Movement and Lega reach a deal, “their ideological differences are likely to hamper their ability to affect legislative changes while raising a question mark over their administration’s longevity.”

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Eurozone Flash PMIs January 2020: Business activity shrinks again

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A man over 75 years receives a coronavirus (Covid-19) vaccine shot in Strasbourg, France.

Anadolu Agency | Anadolu Agency | Getty Images

LONDON — Business activity in the euro zone fell to a two-month low in January, preliminary data showed on Friday, on the back of stricter coronavirus-related lockdowns.

The region is grappling with growing Covid-19 infection rates and tighter restrictions as new strains of the virus spread, causing further economic pain.

Markit’s flash composite PMI for the euro zone, which looks at activity across both manufacturing and services, dropped to 47.5 January, versus 49.1 in December. A reading below 50 represents a contraction in activity.

Chris Williamson, chief business economist at IHS Markit, said a double-dip recession for the euro zone was looking “increasingly inevitable.”

“Tighter COVID19 restrictions took a further toll on businesses in January,” he said in a statement.

“Output fell at an increased rate, led by worsening conditions in the service sector and a weakening of manufacturing growth to the lowest seen so far in the sector’s seven-month recovery.”

European Central Bank President Christine Lagarde acknowledged on Thursday that the pandemic still posed “serious risks” to the euro zone economy.

In addition to the new Covid variants, there are also concerns over a slow vaccination roll-out across the European Union.

“In this environment ample monetary stimulus remains essential,” Lagarde said. The ECB decided at a meeting on Thursday to keep interest rates and its wider stimulus programs unchanged for now, having boosted its support in December.

The ECB expects the euro zone’s GDP (gross domestic product) to expand by 3.9% in 2021, and 2.1% in 2022. This is after a contraction of 7.3% last year. However, these forecasts are dependent on the evolution of the pandemic.

France hires more

Earlier, France’s business activity data also came in at a two-month low, reflecting the imposition of stricter curfews across the country. The country’s composite PMI for January was 47, making a contraction.

However, French businesses hired more employees in January — the first increase in job figures in almost a year.

“The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year,” Eliot Kerr, economist at IHS Markit said, in a statement.

In Germany, business activity managed to grow slightly in January, with the flash composite output index coming in at 50.8. However, the reading represented a seven-month low for Europe’s economic engine.

Phil Smith, associate director at IHS Markit, highlighted a slower momentum in manufacturing activity in the country, and a continued hit to the services sector during January.

“All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come,” he said.

The German government decided some days ago to extend the national lockdown until Feb. 14.

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Biden relief plan faces Republican, moderate opposition

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Wellness expert Deepak Chopra wants Biden to rethink health care

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