Bleak forecast for Italy

Centre for Economics and Business Research warns that eurozone's third largest economy could default

The Centre for Economics and Business Research (CEBR) has warned that Italy will struggle to avoid default over the coming months.

Despite Italian Prime Minister Silvio Berlusconi's address to parliament on Wednesday, in which he reiterated the strength of the Italian economy, British think tank CEBR indicates that debt-laden Italy is anything but.

CEBR modeled "good" and "bad" economic scenarios for the countries it analysed. For Italy to avoid default, significant economic growth will need to kick in rapidly. This looks unlikely in a country whose economy grew by just 0.1 per cent in the first quarter of 2011 and whose future growth is set to remain feeble, despite running tight budgets and vowing to eliminate its deficit by 2014.

In better news, CEBR reports that Spain might just avoid default. Here, conditions are better because the country is much less laden with debt.
Chief executive of CEBR Douglas McWilliams:

The key to Spain is that their exports remain fairly successful despite the strength of the euro, and most of those owning empty property are middle class families who have not yet dumped it on the market. Fingers crossed but there is a real chance that Spain may avoid default and debt restructuring unless it gets dragged down by contagion.