Sex and drugs and cigarettes trigger Italy’s economic revival

The country has narrowly escaped a third recession in six years

Italian Prime Minister Matteo Renzi (Getty Images)

It appears that only Italy’s booming organised crime sector has been able to lift the country’s moribund economy out of recession.

Accounting changes across the EU have seen key illegal economic activities such as prostitution and drug trafficking included in a country’s official GDP measure.

As a result, Italy’s economy was said to have risen slightly from a 0.1 per cent decline for the first quarter of 2014 to a flat reading, the National Institute for Statistics, Istat, said.

Earnings from prostitution, narcotics and black market cigarettes and alcohol all helped stop the eurozone’s third- biggest economy shrinking. This meant Italy escaped, by the skin of its teeth, having its third recession in the last six years.

The accounting system, known as SEC 2010, is supposed to help comparison of data between countries, given that some have decriminalised prostitution and drug use.

The revision brings a breathing space for embattled Prime Minister Matteo Renzi, who is struggling to boost the economy and implement reforms while keeping the deficit below the EU’s 3 per cent ceiling.

But new data also showed the spectre of deflation hovering over Italy, with inflation now at -0.2 per cent. Experts note that negative inflation will make Italy’s public debt mountain even harder to pay off.