Negative Outlook: Fitch downgrades Italy to ‘BBB+’

Italy polls left the country in a political deadlock, with no party or coalition able to form a government on its own.

ROME: The international ratings agency Fitch said Friday it had downgraded Italy’s sovereign debt rating by one notch to “BBB+” from “A-” and added that the outlook was negative.

Fitch pointed in particular to “the inconclusive results of the Italian parliamentary elections on 24-25 February” which “make it unlikely that a stable new government can be formed in the next few weeks.” Italy’s vote left the country in a political deadlock, with no party or coalition able to form a government on its own, and party leaders have made little progress in talks so far. The uncertainty has not been reflected on stock markets until now, but should Italy slip back into the debt mire it could have a knock-on effect on other vulnerable countries that use the euro currency. Italy’s borrowing costs rose slightly to 4.599% on 10-year government bonds from 4.596% just before Fitch’s announcement. It added that the economy was likely to shrink by 1.8% this year, in the wake of a 2.4% contraction in 2012.

Published in The Express Tribune, March 10^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.