Italy is in recession.

According to the Italian employers' association Confindustria, it is no longer just a so-called technical recession, which describes two quarters of a decline in gross domestic product (GDP).

But the definition of at least a brief recession is met, and only under the rather optimistic assumption of a war in Ukraine ending in July.

At the presentation of the association's latest estimate on Saturday in Rome, the Italian employers' president Carlo Bonomi spoke of "terrifying figures" that gave reason to give even more emphasis to the warnings that had been made for a long time.

Since the outbreak of the war, 16 percent of Italian industrial companies have slowed down their production due to increased costs or a lack of raw materials, and some have stopped work altogether.

The association expects this proportion to increase to 46 percent of industrial companies in the next three months.

The third largest economy after Germany and France is watching its gross domestic product with eagle eyes, because the economy has been suffering from weak growth for decades.

Optimism had returned under Draghi

Since Mario Draghi became prime minister, hopes of a lasting boost to the economy had grown.

Economic growth of 6.6 percent last year confirmed confidence.

But now there is a risk of a decline.

The employers' association estimates that GDP will fall by 0.2 percent in the first quarter and by 0.5 percent in the second quarter.

The point at which economic output returns to pre-pandemic levels is shifting.

"And let's not forget that we are still 8 percentage points below the level of 2008," before the global financial crisis, added Employers' President Bonomi.

A recovery would be possible in the second half of 2022, so that economic growth of 1.9 percent could still result at the end of the year.

But the economists assume that the war will end soon.

Two other scenarios calculated by the association each come to worse results, including a long recession until 2023. The Italian government will also be revising its growth forecast for 2022 significantly downwards in the next few days, Italian Finance and Economy Minister Daniele Franco announced at the weekend .

Economics Minister Daniele corrects forecast downwards

So far, she was expecting an increase of more than 4 percent.

This prediction made before the war is now obsolete.

Now almost 2,000 companies surveyed by the employers' association have given the increased cost of energy and raw materials and delivery problems from their suppliers as reasons for the slowdown.

Italian companies' energy bills, which totaled just €8 billion in 2019, could soar to more than €60 billion this year, Bonomi warned.

The Lombardy region with its pronounced industrial structure is particularly affected.

The authorities recently reported that 310 companies had stopped production there.

Italy's largest paper manufacturer, Pro-Gest, was one of the first to do so.

After a week in which his machines for the production of sanitary paper and corrugated board were idle, he has started operations again.

He was able to negotiate higher prices with his customers, it said.

"But the majority of companies are unable to pass on the higher costs to customers," complained Bonomi.

Industry wants an intervention in energy prices

The employers' association is now demanding a price cap for natural gas as a countermeasure.

If that cannot be enforced at European level, then Italy should act nationally.

The Italian government, together with countries such as Spain, Greece and Belgium, have made this demand for a price cap at European level.

Russia is dependent on European buyers because the country has no alternative to the big buyers from Europe, Draghi said recently.

The Europeans could therefore push through a significantly lower natural gas price.

But they would have to bundle their demand and they shouldn't be afraid of a Russian delivery stop.

"Because Russia cannot sell its gas to another customer," said the Prime Minister, adding: "There is no reason why gas is so expensive for Europeans."

However, European countries such as Germany or the Netherlands have opposed a price cap because it would be a major market intervention with unforeseeable consequences.

Natural gas is not only sourced from Russia.

Contracts must be broken, says Giampaolo Galli, an economist at the Università Cattolica del Sacro Cuore.

“It is also uncertain how the tug of war with Russia will end.

There is a risk of gas supply disruptions depending on how Russia will react,” he says.

The Italian employers' association also demands that the European reconstruction plan, from which Italy benefits more than the other countries, be adjusted in its priorities.

"To put it bluntly, I cannot understand that 52 kilometers of cycle paths should be more important than a gas liquefaction plant, which we urgently need".

However, association president Bonomi opposed an expansion of the Italian state budget deficit, which some politicians are calling for.

"With spending of more than 900 billion euros a year, there is enough financial leeway in Italy," he said.