Moody’s Ratings recently announced its decision to cut Italy’s rating to Baa3 while keeping the outlook stable.
Key quotes (via Reuters)
- A key driver for downgrade of Italy’s ratings to Baa3 is a material weakening in Italy’s fiscal strength.
- Italy’s ratings downgrade also due to negative implications for medium-term growth of stalling of plans for structural economic & fiscal reforms.
- Italy’s foreign and local currency bond and deposit ceilings were lowered to aa3 from the previous aa2.
- Italy’s short-term foreign-currency bond and deposit ceilings were unchanged at prime-1.
- Italy’s fiscal & economic policy plans “do not comprise a coherent agenda of reforms”.
- Italy still exhibits important credit strengths that balance weakening fiscal prospects.
- Most of Italian government’s spending increases are structural in nature, implying that they will be difficult to reverse.
- Italy’s high debt level severely limits authorities’ ability to use fiscal policy to cushion any future economic downturn.