ITALY NEWS

Downgraded?

Italy's financial future unfavourable
(issue no. 144/2011 / June 1, 2011)

The international financial rating agency, Standard & Poor, has revised Italy's A+ rating in the negative. The agency revealed in late May that there is now a one in three chance that Italy's economic rating will be downgraded within the next two years. Analysts predicted that Italy's slow economic growth have increased, putting it at risk if the market conditions turn bad.

 

S&P experts expect Italy, the eurozone's third largest economy, to decrease its budget deficit in the coming years. In addition, Italy must boost labor market reforms for faster economic growth, yet this will be difficult in this time of political instability in the Italian parliament. The worst case scenario for Italy, according to analysts, is that slow growth will keep public debt 'painfully high.' S&P Associate Director, Eileen Zhang said that Italy must roll over 300 billion euro in government this year and in 2012 to see significant changes to its economy. S&P also recommend that the Italian government should focus on structural reforms and fiscal policy since it cannot devalue its currency as a member of the eurozone. 

 

Despite the negative outlook, Senior Director at S&P for European Sovereign Ratings, Frank Gill, said Italy still remains 'highly creditworthy.'

 

 

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