After months of bad news, the Italian economy saw its industrial output tick upwards slightly by 0.8% in March,  the second consecutive month to register a minuscule positive trend, the Italian Statistical Service (ISTAT) reported.

The Italian government had already announced that it would deliver on its promise to introduce a flat tax for small and medium businesses, part of a move designed to boost business confidence and increase investment.

The combined news of higher industrial output and a new tax policy had an immediate effect on the spread between Italian and German 10-year bond yields which fell below the psychologically important threshold of 240 points.

The news comes just a day after the Italian government downgraded its growth projections to merely 0.2% for 2019, down from an original estimate of 1%. This projection is now in line with the International Monetary Fund and the European Commission projections, which come hand in hand with the expectation of a higher public deficit.

The Italian government now concedes that its 2019 budget deficit will be 2.4%, rather than 2.04%. Moreover, public debt is expected to surge to 132.7% of GDP. This is also the case in France, as Paris also expects the deficit to reach 3.2% of GDP.

More controversially, the Italian government is also going ahead with a plan for early retirement and a guaranteed citizens’ wage income, which the OECD has condemned as unsustainable.