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Fitchslapped: Italy Downgraded To BBB+ (Outlook Negative)
The France-based ratings agency has just joined China's Dagong, and US Moody's by Fitch-slapping Italy with a BBB ratings handle. Citing four main reasons: election results which and 'non-conducive' for further structural reforms, deeper than expected recession, greater than expected budget deficits, and a weak government less able to respond to shocks. But apart from all that, as we noted earlier, Italian stocks and bonds are bid.
BTP Futures not happy...
Via Fitch:
FITCH DOWNGRADES ITALY TO 'BBB+'; OUTLOOK NEGATIVE
Fitch Ratings-London-08 March 2013: Fitch Ratings has downgraded Italy's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'BBB+' from 'A-'. The Outlook on the Long-term IDRs is Negative. Fitch has simultaneously affirmed the Short-term foreign currency IDR at 'F2' and the common eurozone Country Ceiling for Italy at 'AAA'.
KEY RATING DRIVERS
The downgrade of Italy's sovereign ratings reflects the following key rating factors:
- The inconclusive results of the Italian parliamentary elections on 24-25 February make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.
- Q412 data confirms that the ongoing recession in Italy is one of the deepest in Europe. The unfavourable starting position and some recent developments, like the unexpected fall in employment and persistently weak sentiment indicators, increase the risk of a more protracted and deeper recession than previously expected. Fitch expects a GDP contraction of 1.8% in 2013, due largely to the carry-over from the 2.4% contraction in 2012.
- Due to the deeper recession and its adverse impact on headline budget deficit, the gross general government debt (GGGD) will peak in 2013 at close to 130% of GDP compared with Fitch's estimate of 125% in mid-2012, even assuming an unchanged underlying fiscal stance.
- A weak government could be slower and less able to respond to domestic or external economic shocks.
The 'BBB+' rating reflects:
- The rating remains supported by the relatively wealthy, high value-added and diverse economy with moderate levels of private sector indebtedness.
- Italy has progressed substantially over the past two years with fiscal consolidation. Public sector deficit was 3% of GDP in 2012, a result of 2.3pp fiscal consolidation in structural terms, according to the recent estimate of the European Commission.
- The fiscal measures already adopted should be sufficient to deliver a further narrowing of the budget deficit in 2013 despite the continuing recession. Fitch expects the deficit in 2013 to be around 2.5% of GDP. In structural terms, this would be close to the constitutional requirement of a balanced budget.
- Low contingent fiscal risks from the banking sector; an underlying budgetary position close to that necessary to stabilise the government debt to GDP ratio; and sustainable pension system underpins confidence in the long-term solvency of the Italian state.
- The Italian sovereign has demonstrated its financing flexibility and resilience during the crisis reflecting a strong domestic investor base and average duration of 4.74 years.
RATING SENSITIVITIES
The Negative Outlook reflects the following risk factors that may, individually or collectively, result in a downgrade of the ratings:
- Deeper and longer recession than currently forecast by Fitch that undermines the fiscal consolidation effort and increases contingent risks from the financial sector.
- Economic and fiscal outturns that reduce confidence that GGGD will be placed on a firm downward path from 2014, after peaking in 2013.
- Sustained deterioration in fiscal funding conditions with adverse implications for financial conditions for the private sector and public debt dynamics.
- Re-intensification of the eurozone crisis could lead to a direct increase in GGGD through contingent liabilities due to additional EFSF/ESM commitments and could further weaken the economy through a fall in external demand, weaker confidence and tighter credit conditions.
- Prolonged uncertainty over economic and fiscal policies, failure to comply with the constitutional requirement of balanced budget.
The current Outlook is Negative. Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to an upgrade. However, future developments that may, individually or collectively, lead to a revision of the Outlook to Stable include:
- Sustained economic recovery that supports ongoing fiscal consolidation.
- Confidence that the public debt to GDP ratio is on a firm downward path.
- Further structural reforms that enhance the competitiveness and growth potential of the Italian economy.
Financing conditions have been relatively benign in recent months. The potential backstop of external support from the ESM and ECB reduces the tail risk of a sovereign liquidity crisis for Italy and is supportive of the rating. While it remains uncertain under what conditions Italy would apply for official assistance, the request itself would be neutral for the rating.
KEY ASSUMPTIONS
The rating incorporates Fitch's assumption that the medium-term fiscal trajectory and commitments made by Italy under the Stability and Growth Pact and implied by the constitutional balanced budget amendments will be sustained by any new government.
Fitch assumes that Italy will start recovering in H213 from its deep recession as the large shocks causing the current recession (fiscal consolidation, tight financing conditions, and weak external demand) gradually fade away.
Fitch assumes that the contingent liabilities from the banking sector for the Italian government are limited. Nonetheless, if the recession is deeper and longer than currently anticipated, the risk that the government may be required to make further injections of capital, beyond the Monte dei Paschi recapitalisation, cannot be discounted.
Fitch maintains its assumption that medium-term potential growth is 1% even in light of structural reforms adopted over the last two years.
The current rating reflects Fitch's judgement that Italy will retain market access and, if needed, EU intervention would be requested and provided to avoid unnecessary strains on sovereign liquidity.
Furthermore, Fitch assumes there will be progress in deepening fiscal and financial integration at the eurozone level in line with commitments by euro area policy makers. It also assumes that the risk of fragmentation of the eurozone remains low.
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Italy isn't ok and even Dow 36000 won't change that
Deathbed demographics, just like Greece.
and Japan and South Korea
..and most of Europe and North America
Africa on the other hand has great demographics but no future, no matter what, who or how or when.
Bullish for deathbeds.
adult diapers and caretaking robots
It’s just a darn good thing that flexible fiscal policy, oversight and regulation assures that no entity of consequence can ever be declared to default on anything anymore .. anywhere,, at any time.. at all.
BBB+ is still strong investment grade.
Do you get that fuzzy feeling of being long their bonds?
Send 'em to junk.
Buy Bullion Bitches+
Election results are a symptom of the fucking problems.
They should have nothing whatsoever to do with the ratings...
Jesus H Christ
Excuse, excuses, excuses...
How far down that rabbit hole have they really gone?
Bizarro!
And the Jimbo O'Neil (GSAM) gets on Bolomie this am and tells us what needs to be done to fix the problem: They Need to Fix the Problem
If Fitch had any balls, they'd do the same to the US credit rating. Right now they're just shooting fish in a barrel.
It's all going to be okay. A new pope is on the way. The Vatican has ooooodles of gold, and they'll hand it out to the needy.
I prefer adult robots and caretaking diapers
Long story short; when the wrong person wins the election, use it as an excuse to let everything break, while blaming "the people" who elected them.
Nothing new here.
Politicians are always smarter than the people who elected them.
If the politician was more stupid than the people who elected him,
it would just prove how much more stupid the people were than the politician.
-Bertrand Russell (Para.)
CW
I agree but without the guns, the drones, the wars, the prison population and of course without the great Bernanke.
One Simple ? - IS THERE ANY REAL WORLD IMPLICATION FROM LOWER RATINGS in the EU, US, or Japan???...particularly if the OMT is there to ensure Italian, Spanish, etc. rates don't rise???
Isn't this just completely meaningless now? Meaningless except as a domestic talking point tool to push out Grillo and crazy ideas of young Italians to make any significant change.
Well, some funds maybe restricted to higher ratings.
Man you people are stupid.
The message is if you don't vote and dance the EUSSR, banksters, euro bankster families tune - you get downgraded and destroyed.
Italy should leave the euro.
Fred - how is Italy destroyed or even mildly harmed by this action? Really just a symbolic slap but no real world implication.
Maybe implications of Italian bank follow on downgrades???
Opinion only!
Italy may be hurt some, but they are resilient, and it is a great place to visit, lots of crime (pickpockets) though. Wonderful food and people.
Italian banks buy Italian bonds. Who cares what some frog company says?
Don't worry ....the Wizard of OZ is resurrected for the answer.........just follow the "yellow" brick road
Italy will be the next blood bath in Europe. There is no fixing this one..............then we have France.
It depends on the definition of ok :)
it's the ole pot (France), calling the kettle (Italy) black thingy.............fuck yEU eurozone........................
Don't S&P on me or I may get Moody which will lead to you getting Fitchslapped!
BBBitchslapped.
Fitch slapped. Way to coin a term, Tyler. That one should stick.
Best headline ever.
Does one of those B's stand for Berlusconi?
Berlusconi Bunga Bunga +
When it's America's turn it will be Ben Bernanke Bitchez +
Downgrade BBB+itchez.
Thanks for that. I now have a far better understanding of the way these ratings work.
I suppose when America hits CCC+ it will stand for Cash Can Corrupt
(Outlook Wanton)
Morons. This is the EUSSR and the banksters punishing the Italian people for not voting correctly.
Vote for Grillo and Berlasconi and we will downgrade and destroy you. F the EUSSR, F the Euro, F the banksters and the european bankster families.
Grillo, Berlasconi and the Italian people should say F you - we are leaving the euro.
I agree. And Italy has lots of gold (if they are not lying).
LOL
Probably stored in London and FRBNYC
Good luck with that...
DoChen - next time your rolling to Rome give me a heads up. My uncle has a restaurant near
the Circo Massimo, been there for 40 years...have one of those 3 hour lunches the italians are
famous for. Short stroll and you find yourself in the Roman Forum. No coneheads or tourists,
just politicians and bureaucrats working hard for that BBB rating.
btw - enjoy your posts
Exactly right Freddi it's the banksters way of saying all your money = [labor and resources] belongs to us. Retaliation from the fascist banskster overlords for the anti fascist vote.
And they didn't wait for the markets to close. Yet the Dow barely blinks. The market compacency is truly astounding!
And markets don't even bat an eye. DOW +500 on the week, and they'll just lock it in place for another +500 next week, or so it seems anyway.
Do you know Mr Honey Badger?
Are you talking this Mr. Honey Badger? http://www.youtube.com/watch?v=4r7wHMg5Yjg
Bullish
So that caused the brief drop in equities and the spike in gold.
But, but, but... I thought...
+5 for the title, Tyler
The road to EUR 1.28 is paved with +BBBad economic data.
Don't forget that the BBB+ is an average. So one can only wonder what the rating of Italy would be if it was comprised only of its southern regions.
In fact the south must be totally broke.
It might not only be Scotland seeking to break away from the UK.
Where's Luca?
He sleeps wit da Fitches?
Very punny.
... after being cuckolded by the Fitchwife.
I thought fitch promised not to downgrade any italians not involved in combat?
Well they saw everybody talking and waving their hands about so figured....
(And I can say that being part Italian, Guidos and Guidettes)
you toucha my bond rating, I breaka you face
Obama administration or maybe Merkel or ECB or Berscoloni will now investigate Fitch, joining S&P in suspicious and possibly "unlawful" activity and possibly even considered an enemy of the State, any State. Why, things are going so well, how could they even consider this?
funny how this downgrade did not come after hours.
SPAIN DOWNGRADED TO THE BIGGEST JUNK EVER
The same people that own the banks own the ratings agencies. They're up to something no good.
They are going for a new election...with Beppo and Bunga out of the way of course.
Otherwise would they bother if they had the upper hand - why else would they fuck up the situation for their technocrat government with the downgrade.
Beppe is making all these fools wear brown pants to hide the stains. Funny how the election victory of someone opposed to crime causes the country's rating to go down? Well, not so funny.
Insight of the Year
Kudos
Only Grillo the comedian can save them...
Total non-event... Any agency that gives Uncle Scam its highest possible rating doesn't have any credibility.
I fairness to them, the US Govt has made it pretty clear what the consequences are for ratings agencies that talk even moderately honestly about the US debt and deficit.
I could'nt say it better. Thank's
You downgrade em and your a threat to national security...
There's no limit to the bullshit stories the sheeple will buy....
Italy: Beppe Grillo about money as debt
First part of a clip with Beppe Grillo talking about money as debt, seigniorage, national debt, money issue and money sovereignty.
http://homment.com/Vym7BqABeH
thanks for the clip. Much better and profound than anything you can see with Jon Steward or Colbert, no wander he could get that high %
Beppe better be on the lookout for hot-tub heart attacks and/or visits from Signor Drono.
So... could this be the international 'experiment' we in the usa could look to for a 'clue' as to what would/could happen here in the usa should we actually get the balls to elect a marginal third party candidate??? If it is, I would suggest we freedom thinking folks pay very close attention.
The only thing that comes to mind when you put this heading alongside the photo of Berlu :
IS FITCHSPLAPPED BETTER THAN BEING BITCHSLAPPED?
Between the devil and the deep blue...Forza Italia is al dente!
The Italian banks will be downgraded over the w/e or next week. That usually happens after a sovereign downgrade. They should be rated FFF-. IMHO
They should all be rated WTF -. IMHO
what a coincidence, they wait for the european markets to close to announce this. fucking jokes. by the time the weekend is over, they will come up with some bs rumor how things are looking up to ensure the european markets, specifically the ftse-mib is up.
what a fucking joke.
And the worst thing is they already played that card at least 263 times
Not that I'm countin....
Just type up a "stock" story and just repost it every couple weeks.
so there's no confusion
I am sure the average italian will just say bite my whopper
"Fitchslapped?"
I think you made that word up.
"it's the ole pot (France), calling the kettle (Italy) black thingy.............fuck yEU eurozone........................"
At least the Italians still know how their politicians properly. In France (a recent poll told us) they want... Christine Lagarde at the helm. THIS BITCH? Vous êtes cons les Français?
Whose poll?
Fitch and Moody's
Ya afraid of downgrading the US and Eric the Placeholder's DOJ Goon squad?
Afraid Eric the Placeholder will send drones after you?
Ratings do such a great job. Just like they did in 2007. Great job with Worldcom and Enron too.
Call Krugman. He'll know what the real truth is.
BungaBungaBunga + more Bunga
Can't they just revert to a shit currency like in the US and then intimidate and sue anyone that downgrades them? Wise up suckers. In fact, the need to call GoldmanSachs. They have a group that specializes in bullshiting the clueless into having full, faith and credit in whatever garbage one might sell. Doing godz werk!
Where's an iceberg when you need one.
You just made the list Fitch......... Fahgettaboudit!........Yah.....But no........Your in big trouble.........The boss is not gonna like this
He likes his arrows to go up.....capeche?
You don't wanna be know as Fitch the Snitch you change it...
or else