• We have revised our average real and nominal GDP growth projections for Italy over the 2014-2017 forecast horizon down to 0.5% and 1.2%, respectively, from 1.0% and 1.9%, as persistently low inflation and a difficult business environment continue to weigh on Italy’s economic prospects.
  • In our opinion, Italy’s weak real and nominal economic prospects have undermined public debt dynamics more than we forecast in our June 6, 2014 report. In absolute terms, we now estimate Italian general government debt will be €2.256 trillion by year-end 2017, which is €80 billion higher (or 4.9% of estimated 2014 GDP) than we forecast in June.
  • Under our criteria, such a large increase in debt, combined with consistently low growth and eroded competitiveness, are not commensurate with a ‘BBB’ rating.
  • We are therefore lowering our long- and short-term sovereign credit ratings on Italy to ‘BBB-/A-3’ from ‘BBB/A-2’.
  • The stable outlook reflects our expectation that the government will gradually implement comprehensive and potentially growth-enhancing structural and budgetary reforms, and that household balance sheets will remain strong enough to absorb further increases in public debt. We also assume the European Central Bank’s monetary policy stance will continue to support a normalization of inflation in Italy and its key eurozone trading partners.

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London 25 April 2014

Fitch Ratings has revised Italy’s Outlook to Stable from Negative. At the same time the agency has affirmed Italy’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘BBB+’. The issue ratings on Italy’s senior unsecured foreign and local currency bonds were also affirmed at ‘BBB+’. The Country Ceiling has been affirmed at ‘AA+’ and the Short-term foreign currency IDR at ‘F2’.

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Frankfurt am Main, February 14, 2014

Moody’s Investors Service has today changed the outlook on Italy’s Baa2 government bond rating to stable from negative. Concurrently, Moody’s has affirmed Italy’s Baa2 and Prime-2 debt ratings.

The key drivers for changing the rating outlook to stable are:

1.) The resilience of Italy’s government financial strength. This is reflected in (i) Moody’s expectations of a levelling-off of Italy’s general government debt-to-GDP ratio in 2014; and (ii) the country’s robust debt-affordability profile, which is underpinned by low funding costs by historical standards, and a largely stable ratio of interest payments-to-general government revenues throughout the euro area debt crisis.

2.) The reduction of the risks for the Italian government’s balance sheet related to contingent liabilities from (i) the potential recapitalisation needs of Italian banks; and (ii) loans by the European Financial Stability Facility (EFSF, Aa1 negative) and the European Stability Mechanism (ESM, Aa1 negative) provided to euro area countries under an EU/IMF support programme.

Italy’s foreign and local-currency country ceilings for debt and deposits remain unchanged at A2/P-1. These ceilings act as a cap on ratings that can be assigned to the foreign and local-currency obligations of entities domiciled in the country.

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Frankfurt am Main, April 26, 2013

Moody’s Investors Service has today affirmed Italy’s Baa2 long-term government bond ratings, and is maintaining the negative outlook. In addition, Moody’s has also affirmed Italy’s Prime-2 short-term debt rating.

The key factors for maintaining the negative outlook are:

  • Italy’s subdued economic outlook as a result of weak domestic and external demand (especially from its EU trading partners) and a slow pace of improvement in unit labour costs relative to other peripheral countries.
  • The negative outlook on Italy’s banking system, which is characterised by weak profitability, a deterioration of asset quality and restricted access to market funding, and which indirectly raises the cost of funding for small and medium-sized enterprises (SMEs).
  • The elevated risk that the Italian sovereign might lose investor confidence and, ultimately, access to private debt markets as a result of the political stalemate and the resulting uncertainty over future policy direction, as well as contagion risk from events in other peripheral countries.

The key factors behind the affirmation of Italy’s Baa2 rating are:

  • Low funding costs, which, if sustained, buy time for the government to implement reforms and for growth to resume.
  • The government’s primary surplus, which increases the likelihood that Italy’s debt burden will be sustainable, despite the expectation of low medium-term growth in nominal GDP.
  • Economic resiliency, which is supported by the country’s large diversified economy, the relatively low indebtedness of its private sector and the likely availability of financial support, if needed, from euro area members given Italy’s fiscal consolidation progress in recent years and Italy’s systemic importance for the euro area.

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