ROME • Italy’s rating outlook was lowered by Fitch Ratings Inc, which said the fiscal plans of the new government risk a degree of fiscal loosening.
Fitch changed the nation’s credit outlook to ‘Negative’ from ‘Stable’. The rating company maintained its foreign long-term credit rating at BBB, a decision applauded by the Italian government and cited as proof of the credibility of its economic programme.
“The risk of a reversal of structural reforms negatively impacting Italy’s credit fundamentals has increased somewhat, in our view,” Fitch said in a report last Friday. “Fiscal and other policy risks are compounded by the relatively high degree of political uncertainty.”
Concern about Italy’s budget has been an investor focus this summer, with bond yields pushed higher in response to the new populist government’s expensive electoral promises. Those include hefty tax cuts and some form of universal income for the poor that could have a negative impact on the country’s debt and deficit.
Fitch “correctly withheld judgment” by maintaining the foreign long-term rating, Finance Minister Giovanni Tria said during a trip to China, Ansa news agency reported. Government actions “in coming weeks” will convince agencies about Italy’s credit-worthiness.
“We have European commitments which will be respected,” Tria said. These “essentially depend on relations with financial markets.” — Bloomberg