That’s the current estimate of Morgan Stanley economist Vincenzo Guzzo. And even this he suggests can only be achieved at the price of a series of one-off measures which make the longer term outlook even worse. Just one of the problems:” Labor productivity growth averaged an appalling -0.4% over the past four years”.

As Guzzo notes, whilst real wages in Germany have been falling steadily, unit labor in Italy costs swelled by close to 4% per annum between 2001 and 2003. And then, of course, there’s the demography:

Demand management ambitions are illusory. Budget constraints leave no room for meaningful fiscal reflation. Interest rates at historically low levels suggest that monetary policy will not be helpful either. As far as the currency, we should not forget that Italy lost most of the recent ground against its own Euro partners. Facing these daunting challenges and subject to adverse demographics, the country will have to enter a painful period of restructuring on the supply side. The Euro ?anchor? will prevent a major financial crisis, but it will also diminish the sense of urgency among politicians and social partners. Italy is an economy slowly boiling in hot water without realizing that the temperature is on the rise. Financial markets are taking notes: simply watch the spread among government bonds. In my opinion, the scope for further significant widening is clear.