In 2004, Italy's nominal gross domestic product (GDP) was $1.7 trillion, the fourth-largest in Europe and the tenth-largest in the world. In recent years, however, the performance of Italy's economy has lagged the rest of the European Union (EU). In 2003 and 2004, Italy experienced real GDP growth of 0.4 and 1.2 percent, respectively, compared to 1.0 and 2.2 percent for the EU as a whole.

Analysts predict that the Italian economy will grow by 1.0 percent in 2005, still Well below the EU average. The sluggish performance of the Italian economy has led to a substantial deterioration of the country's public finances, with Italy's public debt rising to 106 percent of GDP and the fiscal debt breeching the 3.0 percent cap imposed by the EU Growth and Stability Pact.

With limited domestic energy sources, Italy is highly dependent on energy imports to meet its consumption needs. In absolute terms, Oil consumption has remained relatively static since 1970, but oil's share of Italy’s primary energy mix has decreased significantly, steadily replaced by Natural Gas. A pressing issue affecting Italy has been the country's electricity supply.
 
In the summer of 2003, increased electricity demand during a heat wave overwhelmed Italy’s electricity generation facilities, resulting in rolling blackouts. In September 2003, Italy suffered a nationwide blackout after a storm damaged a transmission line in Switzerland carrying electricity from France. Over the past decade, Italy’s installed electricity generation has not been able to keep up with demand, resulting in an increased share of electricity imports, from 8.8 percent in 1997 to 11 percent in 2002.

Source: Energy Information Administration