S&P downgrades Italy to BBB rating
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Italy has lost the ‘+’ from its Standard & Poor’s credit rating, downgrading the eurozone’s third-largest economy to a lowly BBB status.

 

The move has been deemed “backward-looking” by some economists, and


came with little warning on Tuesday, July 9th.

 

According to S&P, the decision was triggered by their “view of the effects of further weakening growth onItaly’s economic structure and resilience, and its impaired monetary transmission mechanism”.

 

S&P have also cut their forecast ofItaly’s full-year economic performance, now predicting a 1.9% contraction as anticipated by the International Monetary Fund last week.

 

And withItaly’s S&P outlook remaining negative, that means there is more than a one-in-three likelihood that the rating will be downgraded further before the end of 2014.

 

Economists at UniCredit published a report the following day, criticising the S&P move as being too focused on past data, and not enough on likely future announcements.

 

Their experts said: “The timing of the decision comes as a surprise, with no clear trigger, especially considering the recent data releases supporting the view that we might see the end of the recession before year-end.”

 

IfItalywere to fall two more notches in its S&P rating, it would be classed as non-investable – a rating its neighbourSpainis presently a perilous one notch above.

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