Italy: Inflation hits Italians as economy falters

Rome, 3 Feb. (AKI) - Italian inflation rose 3.4 percent in January as wages lag behind price hikes in the European Union's fourth-largest economy.

On a monthly basis, the harmonized index of consumer prices (HICP), the common method used by European Union members, fell 1.8 percent, national statistics office Istat said in a report released Friday.

Using the Italian method to calculate inflation, prices last month rose 3.2 percent over the prior year and 0.3 percent from December, Istat said.

Italians are struggling to make ends meet as their economy falters amid its fourth recession since 2001.

Consumer confidence in January matched December's 16-month low, while the gap between inflation and the increase in wages was the greatest since 1995, national statistics agency Isat said on 26 January in a pair of reports.

Prime minister Mario Monti - leading a group of technocrats, or non-political experts - took over the government in November when a spiralling debt crisis and scandals derailed Silvio Berlusconi's conservative ruling coalition.

Worries increased among the other 16 countries that use the euro currency and international investors regarding Italy's ability to pay interest on its 1.9 trillion euros of debt. Monti reacted by passing emergency budget laws and rules to open sectors of the economy to more competition, prompting strikes and protests. Indicators measuring confidence in Italy have since fluctuated.

Economic conditions for Italians may worsen as they feel the bite of new government measures like tax hikes and pension reform designed to reduce debt and balance the budget.

Deputy finance minister Vittorio Grilli in December forecast Italy's economic output to shrink this year and stagnate in 2013.