Moody’s plays down fears for eurozone stability stemming from Italy

International ratings agency Moody’s said in comments released for publication late on Monday that it would provide an updated decision on Italy’s credit rating by the end of October, with any review for a possible downgrade depending on Italy’s debt trajectory and economic growth.

The agency currently rates Italian sovereign debt at Baa2 with a negative outlook, which is on the verge of falling below the investment grade category. Moody’s delayed its scheduled review from September 7 as it was waiting to see the outline of Italy’s budget for next year.

“Italy has long had an elevated debt burden and has long had problems generating economic growth and the political environment that can allow structural reform efforts to take place is also in question,” Sarah Carlson, senior vice president in the Moody’s sovereign team said in a conference call. “It comes down to the debt trajectory and growth which is linked to structural reform effort,” Carlson added.

At the same time, the agency played down fears for eurozone stability stemming from Italy and the possibility of the country exiting the single currency. It noted that Italians had shown reluctance to leave the euro, and added that the country was “more integrated with Europe than has been feared over the past few years.”

DW