The Italian economy contracted for the eighth consecutive quarter in the second quarter of 2013 but shrank less than analysts expected, offering hope that the country is slowly emerging from recession.
Gross domestic product fell 0.2 percent from the first quarter and dropped 2.0 percent on an annual basis, statistics agency ISTAT said. Analysts had expected a month-on-month contraction of 0.4 percent and an annual contraction of 2.2 percent.
Activity contracted in all of the main sectors of the economy, ISTAT said.
"There are some tentative signs of recovery in Spain and in Italy but we are very far from growth, we're far from a recovery," Albert Gallo, head of European macro credit research at RBS said following the news. "What's necessary here are still very targeted reforms at labor market and in the case of Italy a reform of the electoral law," he said.
(Read more: Berlusconi won't give in: What it means for Italy )
"The political situation is not yet completely stable. We don't expect the government to fall, but with such a divided parliament it's going to be very hard to tackle the reforms that Italy needs," he said.
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