Standard & Poor's confirms its rating on Italy (BBB), but also reaffirms the negative outlook. The merit of the failed rejection by the US rating agency goes to families, who are limiting their debt as much as possible. The state is not equally virtuous given that public debt - underlines S&P - is increasing.
Italy therefore remains a country under "supervised release" given that it has already experienced a recession - the rating agency still disputes - due to the "trend reversal on the front of reforms and a volatility of external demand". According to Standard & Poor's, the country is paying for "a marked deterioration in the external financial conditions of the government and banks", while "continuous political changes weaken the growth potential" of our country. S&P then predicts that the Italian economy will be stalled this year and believes that government policies risk reinforcing wage and labor market rigidity.
In our view, the government's current economic and budgetary plan played a role in the entry of the Italian economy into a technical recession during the second half of 2018, reads the S&P note on Italy. Also weighing "the uncertainty regarding the path of the public finances" which caused the increase in "borrowing costs during the summer of 2018". Although the goal, writes S&P, “was to provide a “greater momentum, government budgetary moves appear to have been counterproductive in many respects, given their negative effects on the financial conditions and funding costs for Italian banks”.
Italian debt thus remains at the BBB level, i.e. medium-low, just two steps away from becoming "junk" debt, or to put it more technically “non-investment grade”.
