Economists polled by Dow Jones Newswires had expected industrial production to rise by 0.1 percent over the month.

On a 12-month comparison, industrial output was up 0.2 percent in June -- far worse than the expected increase of 1.7 percent.

Industrial production had gone down 0.6 percent in May when analysts had expected a rise of 0.1 percent.

The falls in May and June come after three months of big increases.

The data comes ahead of a first estimate for growth expected at 0900 GMT that is being closely watched by investors worried over Italy's high public debt and low economic growth as well as tensions within the government.

The Milan stock exchange dropped 3.5 percent to 15,563 points at the start of trading after a collapse of 5.16 percent on Thursday but recovered later in the day and was down 0.73 percent at around 0830 GMT.

The debt risk premium for Italy meanwhile showed a record wide gap since the creation of the euro.

The spread or difference in the rate of return on Italian 10-year government bonds and the benchmark German bond, the strongest in the eurozone, was 416 basis points.

The spread later eased back slightly to 407 basis points.

The yield on Italian 10-year bonds however remained well above the danger level of six percent, rising to 6.227 percent from 6.189 percent.

Copyright AFP (Agence France-Presse), 2011