Moody’s Investors Service has today placed Italy’s Aa2 local and foreign currency government bond ratings on review for possible downgrade, while affirming its short-term ratings at Prime-1.
The main drivers that prompted the rating review are:
(1) Economic growth challenges due to macroeconomic structural weaknesses and a likely rise in interest rates over time;
(2) Implementation risks surrounding the fiscal consolidation plans that are required to reduce Italy’s stock of debt and keep it at affordable levels; and
(3) Risks posed by changing funding conditions for European sovereigns with high levels of debt.
Like we’ve said before, Italy’s weak growth outlook coupled with its unstable political situation is not good news for the country’s debt.
The result is a slide in the euro, from above $1.43 to below.
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