High inflation smothers salaries in Italy

Rome - Salaries in Italy have touched their lowest in real terms in almost 17 years, according to fresh data.

Real incomes in March rose 1.2 percent over a year earlier, while inflation during the same period rose 3.3 percent, national statistics agency Istat said Tuesday.

The difference between inflation and pay hikes means that Italian's spending power was reduced by about 2.1 percent, the biggest drop in real income since August 1995.

The Italian economy is suffering a recession. Businesses are reluctant to give large pay raises, while low interest rates imposed by the European Central Bank has pushed up inflation.

Italy's economy is in a recession that isn't expected to end this year. Almost 12,000 businesses closed their doors in 2011, the most in four years, a small business trade group recently said.

Italy's economy contracted during the final two quarters of last year, meaning the country is in recession. The International Monetary Fund forecasts the economy will shrink 2.2 percent this  year.