As usual, a corrupt and pathetic Moody's continues to boldly not go where everyone else has gone before. Luckily, S&P, which had the balls to cut the US, has just done so to Europe's next domino, by downgrading Italy from A+ to A, outlook negative. Then again, this was pretty much telegraphed 100% earlier today as noted in "Italy Expected To Cut Growth Forecasts Further." Anyway, those incompetents from Moody's are next.
Full report:
Italy Unsolicited Ratings Lowered To 'A/A-1' On Weaker Growth Prospects, Uncertain Policy Environment; Outlook Negative
Overview
- Italy's net general government debt is the highest among 'A' rated sovereigns. We have revised our projections of Italy's net general government debt and now expect it to peak later and at a higher level than we previously anticipated.
- In our view, Italy's economic growth prospects are weakening and we expect that Italy's fragile governing coalition and policy differences within parliament will continue to limit the government's ability to respond decisively to domestic and external macroeconomic challenges.
- In our view, weaker economic growth performance will likely limit the effectiveness of Italy's revenue-led fiscal consolidation program.
- We have revised our base-case medium-term projections of real GDP growth to an annual average of 0.7% between 2011 to 2014, compared with our previous projection of 1.3% (see "Credit FAQ: Why We Revised The Outlook On Italy To Negative," published May 23, 2011). As part of our ratings analysis, we have also prepared upside and downside macroeconomic scenarios that could drive our future rating actions on Italy.
- We are lowering our long- and short-term unsolicited sovereign credit ratings on Italy to 'A/A-1' from 'A+/A-1+'.
- The negative outlook reflects our view of additional downside risks to public finances related to the trajectory of Italy's real and nominal GDP growth, and implementation risks of the government's fiscal consolidation program.
Comment: Don't hold your breath. Whatever legislation might get passed, you can bet there will be plenty of loopholes in the fine print.