Preliminary figures from Italy show the economy contracted 0.7 percent in the second quarter. That’s less than the drop of 0.8 percent in the first quarter and 2.5 percent fall during the second quarter of last year.

The news comes as Prime Minister Mario Monti pushes ahead with implementing almost $25 billion worth of austerity measures aimed at averting a euro zone debt crisis. The action is helping drive down industrial output and consumer spending, fuelling predictions the economic gloom will deepen.

Meanwhile, investors have continued to dump Italian bonds, pushing interest rates toward unsustainable levels. Many fear Europe’s third-largest euro zone economy would break up the euro if its finances crash.

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