Moody’s joining in the Italy party!
- Changes Italy outlook to stable from negative
- Rating affirmed on sovereign debt at Baa2
- Sees Italy current account surplus 0.9% of GDP
- Letta’s resignation and expectations Renzi will head a new government doesn’t alter its expectations
- May upgrade rating if economy improves on the back of economic, labour market reforms
From the report:
The key drivers for changing the rating outlook to stable are:
1.) The resilience of Italy’s government financial strength. This is reflected in (i) Moody’s expectations of a levelling-off of Italy’s general government debt-to-GDP ratio in 2014; and (ii) the country’s robust debt-affordability profile, which is underpinned by low funding costs by historical standards, and a largely stable ratio of interest payments-to-general government revenues throughout the euro area debt crisis.
2.) The reduction of the risks for the Italian government’s balance sheet related to contingent liabilities from (i) the potential recapitalisation needs of Italian banks; and (ii) loans by the European Financial Stability Facility (EFSF, Aa1 negative) and the European Stability Mechanism (ESM, Aa1 negative) provided to euro area countries under an EU/IMF support programme.
Report from Moody’s: Rating Action:
Moody’s changes outlook to stable on Italy’s Baa2 government bond rating; rating affirmed
Adam had earlier news on Italy: Italian markets cheer new government
