Not that this is shocking news to anyone who has been following the story of Italy’s sovereign debt crisis, but always reliable US firm Standard and Poor’s has cut Italy’s debt rating on fears that its economy will slow, thus hampering its ability to effectively repay its debts. The cut is from A+ to A. Silvio Berlusconi decried the move as being politically motivated which is something that S&P has heard before, albeit in different climes. Other agencies are expected to follow in the footsteps of S&P in their downgrade, with some economists calling this the rating agencies catching up with the markets which have been punishing Italian sovereign debt for some months now. Although Rome recently passed a series of unpopular austerity budget measures, these are seen as not enough to allay fears with regard to Italy’s future growth, particularly since the budgetary measures rely upon tax increases for revenue which inevitably shrink during times of weak economic growth. S&P cites Italian politics, labor unions, and entrenched interests as hindrances to Italy’s effectively tackling its debt problems, not to mention its somewhat laughable Prime Minister who has been as much of a distraction as possible with his cavorting with underage girls as well as lobbing insults at his home country and its allies. The Italian crisis sparks fears of economic ‘contagion‘ spreading throughout the Eurozone as Italy joins Greece, Spain, Ireland and Portugal in the throes of economic crisis, Spain maintaining an unemployment rate of 21%. Italy’s ability to undermine the Euro cannot be underestimated as it has the second highest debt load in Europe.
[BBC]
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