Investing.com - Ratings agency Moody’s said Tuesday that political developments in Italy in the last few days have no bearing on its recent decision to put the country’s debt rating on review for a downgrade.
On Friday, Moody’s placed Italy's Baa2 debt rating on review for downgrade, saying the country faced "significant risk of a material weakening" in its fiscal strength given the plans of its new anti-establishment coalition government.
However, since then Italy’s populist parties abandoned their bid to form a coalition government after the country’s President Sergio Mattarella blocked the nomination of a euro sceptic finance minister.
Italy is now expected to go to the polls again later this year and investors fear that fresh elections could be seen as a referendum on Italy's role in the European Union and may end up bolstering anti euro parties.
Moody’s said Tuesday the key areas of focus for the review remain unchanged following the political developments of recent days.
“We will conclude the review when we will have better visibility on the policy direction of the country, which means that the time frame for the review may exceed the typical period of up to three months”, the ratings agency said.
It said Italy was likely to be downgraded if the next government pursued fiscal policies which were not sufficient to place the public debt ration on a sustainable downward trajectory in the coming years.
Its rating could be confirmed if there was an ambitious program of structural reform by the next government which would result in a sustainably stronger growth performance of the Italian economy.