Official statistics confirmed that Italy's economy contracted by a quarterly rate of 0.8 per cent in the first three months of the year, the worst contraction in three years.

The painful recession keeps pressure on Premier Mario Monti's government, which is struggling to fend off the debt crisis and the perception that Italy could be next to seek a bailout following Spain's decision over the weekend to ask for help for its ailing banks.

The ISTAT statistics agency says the contraction is the worst since the first quarter of 2009, when the economy contracted by 3.5 per cent. ISTAT forecasts that the Italian economy will contract by 1.3 per cent this year, slightly more than the government's estimate of 1.2 per cent.

Spending by families is down significantly.

Keywords: Italy economyISTAT

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