Italy's Berlusconi warns of deep hit to economy

ROME (Reuters) - The financial crisis is affecting Italy's real economy and could turn out to be "very deep," Prime Minister Silvio Berlusconi said on Saturday, and he urged Italians to keep shopping, the Ansa news agency reported.

"A general climate of mistrust is widespread, also because of the prophecies of catastrophe spread by the left," Berlusconi said during regional election campaigning, according to Ansa.

"The Prime Minister and government will try to build trust but only the citizens can -- by not changing their habits -- stem the real economy crisis that is unfortunately arriving, with a steep fall in purchases."

Italy's banks have weathered the financial crisis better than their European peers for the most part, but Italy's economy contracted by 0.5 percent in the third quarter, the steepest quarterly fall for a decade.

Analysts expect the recession to continue for at least three more quarters and full year GDP is seen falling by around 0.3 percent in 2008 and dropping considerably more steeply in 2009.

(Writing by Deepa Babington; Editing by Louise Ireland)