Rating, Italy still under test: waiting for Moody’s judgement

PNRR Meloni we are working hard to achieve the fifth

(Finance) – After the evaluations of S&P, DBRS and Fitch, for Rome it is the time of the most feared exam: the judgement Moody’s will publish late in the evening of Friday 17 November. The country, in fact, is at trial with ‘negative outlook’ and the current assessment Baa3 it is just above the threshold of the so-called investment grade, the level for investing. Seight you go down to Junk.

In the meantime, it fell to the Minister of Economy to keep in line with the rating agencies, Giancarlo Giorgetti already during the last session of the work of the International Monetary Fund. The first three assessments, made as mentioned respectively by S&P, DBRS and Fitch, left the rating unchanged and also the outlook, i.e. the prospects, on Italy’s sovereign debt, despite the economic slowdown highlighted in the various reports. Fitch he also underlined that the Meloni-led executive can count on one “more stable parliamentary majority than previous administrations” although he faces “considerable political pressure to better deliver on his electoral commitments”. And it is precisely this passage that is leveraged by Minister Adolfo Urso and other members of the majority, underlining how the solidity of the economy and of the coalition that governs the executive is recognised.

In the background, one Budget law presented as prudent in numbers, designed and refined in detail to prevent some of the most important items – such as pensions – from affecting the accounts. Precisely with this in mind, it arrived from the Government “the invitation” to the majority that supports him not to present amendments to the budget, with the aim of keeping the balances unchanged as well as avoiding slip-ups on thorny chapters, such as – for example – the super bonus which has a considerable impact on the debt.

Most analysts agree on the scenario cwhich provides for a confirmation of the opinion on Italy’s rating by Moody’s but also indicates the difficult predictability of the “report card” of the most authoritative agency. Ask Joe Biden for details who in the last few hours have seen his ‘triple A’ rating confirmed but, surprisingly, cut the outlook from ‘stable to negative’.

What is certain is that Moody’s report card will have a double impact: political but also financial given that if Italy’s rating were to slip below investment grade, the spread between BTPs and German Bunds, which now hovers around 185 , “could test” the 250 basis points threshold: this is the scenario outlined by a study by Barclays.