Among the 19 countries of the Eurozone, Italy is the only one with a negative outlook. Not only that: since 2010 the Italian economy has grown by only 0,6% in real terms, against 10,6% for the entire currency area. He writes it S&P Global Ratings in his latest report on the performance of the ratings of the sovereign countries of the Eurozone. “Weak growth and the inability of policymakers to deal with it explain the negative prospects for the Italian sovereign rating”, reads the analysis.
“In the next few years we expect a slow increase in the Italian public debt – continues the agency – accompanied by a further reduction of the financial leverage in the private sector. We believe the economy will stagnate in 2019 before recovering next year (0,6%)”.
According to S&P, at the moment Italy does not risk falling into the spiral of a public debt crisis, "however in an alternative scenario in which policymakers pursue unorthodox solutions - such as the introduction of a parallel currency or of measures of unfunded budget, to circumvent the fiscal constraints established by the EU treaties – Italy's accession to the euro area could be questioned. In extremis, there could be a new crisis of confidence like the one that occurred in Greece in June 2015, but in a much larger and more systemically important member country of the European Union”.
As for the reasons for the low growth, S&P explains that “first, bank lending has slowed sharply as of 2010. Secondly, the propensity of the Italian private sector to save rather than invest has become even more pronounced. Even if the Italian economy is much richer than the Greek one, the rigidities that characterize the labor market and the productive fabric are similar and hold back the entry of new players and investments, with a negative impact on growth”.
In this context, “after winning the parliamentary elections of March 2018, the current coalition government quickly froze modest reform initiatives – concludes the rating agency – and has begun to oppose the European Commission on its mandate to supervise compliance by the Member States with the Union's tax regulations. An open dispute between the government of a country and the European institutions it typically has minor effects on the private sector of the economy, including the funding foundations of a country's banking system. This was the case in Greece, a much smaller economy (less than 2% of Eurozone GDP) in June 2015. The question is whether it will be the same for a much larger economy like Italy, which it represents 15% of the GDP of the Eurozone”.
