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London, 21 February 2014

Moody’s Investors Service has today upgraded Spain’s government bond rating to Baa2 from Baa3 and assigned a positive outlook. Concurrently, Moody’s has also upgraded Spain’s short-term rating to (P) Prime-2 from (P) Prime-3.

The key drivers for upgrading Spain’s debt ratings and assigning a positive outlook are as follows:

  1. The rebalancing of the Spanish economy towards a more sustainable growth model, which is being underpinned by structural improvements in the country’s external competitiveness, and the ongoing deleveraging in the domestic economy.
  2. The progress made in implementing broad structural reforms, particularly in the labour market and the public pension system, structural fiscal measures and changes to the fiscal framework for the country’s regional governments as well as the restructuring of the Spanish banking system. These efforts support Moody’s expectation of stronger, more sustainable economic growth over the medium term and continued improvements in the resilience of government finances.
  3. The improvement in the government’s funding conditions since the height of the euro area sovereign debt crisis in mid-2012. In Moody’s view, the fall in borrowing costs reflects the combined effects of the European Central Bank’s (ECB) policy announcements and actions, the evident improvements in the Spanish economy, and the government’s track record of implementation of fiscal and structural policy measures.

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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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Moody’s downgrades Italy’s government bond rating to Baa2 from A3, maintains negative outlook

Frankfurt am Main, July 13, 2012. Moody’s Investors Service has today downgraded Italy’s government bond rating to Baa2 from A3. The outlook remains negative. Italy’s Prime-2 short-term rating has not changed.

The decision to downgrade Italy’s rating reflects the following key factors:

1. Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base. The risk of a Greek exit from the euro has risen, the Spanish banking system will experience greater credit losses than anticipated, and Spain’s own funding challenges are greater than previously recognized.

2. Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets. Failure to meet fiscal targets in turn could weaken market confidence further, raising the risk of a sudden stop in market funding.

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