Moody’s downgrades Italy’s rating

Rating agency Moody’s on Friday downgraded Italy’s credit rating in a widely expected move that left it one notch above junk territory. Moody’s cut Italy’s local and foreign-currency issuer ratings to Baa3 from Baa2 — citing weakening of Italy’s fiscal strength and stalled plans for economic and fiscal reforms — and changed the outlook to “stable” from “negative”.
The agency said:

The first driver of today’s downgrade to Baa3 is the recently announced material shift in fiscal strategy, with significantly higher budget deficits planned for the coming three years compared to earlier expectations. The shift towards an expansionary fiscal policy suggests that, rather than falling over the coming years as was projected under the previous government’s fiscal stance, Italy’s public debt will instead remain around the current 130% of GDP, a level that makes Italy vulnerable to future domestic or externally-sourced shocks, in particular to weaker economic growth.

FT