OUR Italy it is the only country controlled by a credit rating agency. Moody’s Investor Service which risks losing investment grade. Moody’s yesterday warned Rome about the possibility of downgrading its credit rating, given that it already has a negative outlook and its picture is poor in terms of reforms related to its rights from its funds. Recovery Fund.

“Italy is the only country with a Baa3 rating and a negative outlook,” the house’s analysts said, and attributed the poor outlook to “anemic growth and high financing costs, which could further worsen its financial position.” The Baa3 rating is just one notch above junk bonds, and Moody’s has given Italian debt a negative outlook since August. This is a particularly pessimistic assessment of the situation in the neighboring country, which has been ruled by a motley coalition with a far-right prime minister for about six months now. Georgia Meloni.

According to Moody’s analysts, Italy faces “increased risk” in terms of implementing critical reforms to increase its growth potential, and in particular in terms of measures that are a condition for receiving funds from the Recovery Fund.

If the rating of Italian debt is downgraded to the level of “junk” bonds, the country’s bonds will no longer be so attractive to investors.

With its remarks, Moody’s reminds Rome how easy it can be to change its favorable attitude from the bond markets during the year. The difference between the yield on a ten-year bond and that of its German counterpart, the so-called spread, has narrowed to 187 basis points, well below the 250 points at the end of last year. This is a favorable treatment bond market associated with the relatively calm political period that the country is experiencing, with the government’s stated commitment to fiscal prudence being critical, as well as its policies ECB support the bonds of almost all of their countries Eurozone. Georgia Meloni’s government has been extra careful not to undermine the Italian economy, and the recently unveiled budget provides for permanent reductions in the budget deficit and debt, along with a range of investments. This was positively commented by financial analysts.

However, if Italy’s debt is downgraded to junk bonds, the neighboring country’s national prestige will be undermined, and at the same time it will enter uncharted waters, since its bonds will no longer be junk. attractive to investors. However, this does not mean that the ECB will stop buying its bonds in the context of quantitative easing programs, since they are included in these programs as long as they are assigned investment grade on at least one of the four major credit ratings. agencies. And in this case, S&P Global Ratings confirmed last week the rating it gave to Italian debt, and it is one notch higher, at BBB and with a stable outlook, like Fitch.

Yesterday’s Moody’s warning largely did not affect Italian bonds as the 10-year spread remained unchanged at 189 basis points. However, Italy’s debt exceeds 140% of its GDP, and its economic growth remains persistently sluggish.