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ROME, Dec 29 (Reuters) - Sentiment among Italian businesses in December hit the lowest level since at least January 1991, in the latest sign that the global financial crisis will take a heavy toll on the euro zone's third largest economy.
Economic research institute ISAE's seasonally adjusted business morale index fell to 66.6 from a downwardly revised 71.6 in November, due to another plunge in orders and a collapse in the outlook for production.
ISAE said the figure was the lowest since the historic series began in January 1991. Earlier data was less reliable and difficult to compare.
"There is no reason why (businesses) shouldn't feel extremely pessimistic about the next year," said Gilles Moec at Bank of America.
"In the midst of a global recession, there is a chance that the Italian corporate sector could do real bad."
Morale was down for the seventh month running and ISAE also confirmed that firms were reporting difficulties in obtaining credit. The export markets were also seen deteriorating.
"The crisis is extending to all the principal productive sectors and is also spread throughout the country," ISAE said in a statement.
The index has fallen a dramatic 14.4 points in the last three months and is some 23.4 points below its long-term average of around 90. The data was below all forecasts in a Reuters survey of analysts, which pointed to an index level of 70.6.
Most independent forecasters expect Italy's economy to contract by around 0.5 percent this year and to shrink by around 1 percent in 2009, which would be the first consecutive years of falling GDP since World War Two.
For a table on ISAE's November business confidence index and its components, click on [IDn:RAT004355]. (Reporting by Phil Stewart; editing by Tony Austin)