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Fitchslapped: Italy Downgraded To BBB+ (Outlook Negative)

Tyler Durden's picture




 

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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Fri, 03/08/2013 - 13:21 | 3312532 Neethgie
Neethgie's picture

Italy isn't ok and even Dow 36000 won't change that

Fri, 03/08/2013 - 13:25 | 3312553 TBT or not TBT
TBT or not TBT's picture

Deathbed demographics, just like Greece.

Fri, 03/08/2013 - 13:26 | 3312565 swissaustrian
swissaustrian's picture

and Japan and South Korea

Fri, 03/08/2013 - 13:33 | 3312596 walküre
walküre's picture

..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.

Fri, 03/08/2013 - 13:35 | 3312611 McMolotov
McMolotov's picture

Bullish for deathbeds.

Fri, 03/08/2013 - 13:36 | 3312615 swissaustrian
swissaustrian's picture

adult diapers and caretaking robots

Fri, 03/08/2013 - 13:52 | 3312662 Manthong
Manthong's picture

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.

Fri, 03/08/2013 - 14:11 | 3312722 Hippocratic Oaf
Hippocratic Oaf's picture

BBB+ is still strong investment grade.

Do you get that fuzzy feeling of being long their bonds?

 

Send 'em to junk.

Buy Bullion Bitches+

Fri, 03/08/2013 - 14:25 | 3312770 knukles
knukles's picture

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

 

Fri, 03/08/2013 - 14:24 | 3312772 FL_Conservative
FL_Conservative's picture

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.

Fri, 03/08/2013 - 14:56 | 3312887 Lore
Lore's picture

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.

Sat, 03/09/2013 - 03:48 | 3314377 Non Passaran
Non Passaran's picture

I prefer adult robots and caretaking diapers

Fri, 03/08/2013 - 13:28 | 3312577 NotApplicable
NotApplicable's picture

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.

Fri, 03/08/2013 - 14:51 | 3312866 Charles Wilson
Charles Wilson's picture

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

Fri, 03/08/2013 - 13:34 | 3312606 Peter Pan
Peter Pan's picture

I agree but without the guns, the drones, the wars, the prison population and of course without the great Bernanke.

Fri, 03/08/2013 - 13:48 | 3312628 Ham-bone
Ham-bone's picture

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.

Fri, 03/08/2013 - 23:52 | 3314175 mkhs
mkhs's picture

Well, some funds maybe restricted to higher ratings.

Fri, 03/08/2013 - 13:40 | 3312631 Freddie
Freddie's picture

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.

Fri, 03/08/2013 - 13:55 | 3312638 Ham-bone
Ham-bone's picture

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???

Fri, 03/08/2013 - 14:18 | 3312747 DoChenRollingBearing
DoChenRollingBearing's picture

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.

Fri, 03/08/2013 - 23:55 | 3314182 mkhs
mkhs's picture

Italian banks buy Italian bonds.  Who cares what some frog company says?

Fri, 03/08/2013 - 13:43 | 3312642 kliguy38
kliguy38's picture

Don't worry ....the Wizard of OZ is resurrected for the answer.........just follow the "yellow" brick road

Sat, 03/09/2013 - 04:39 | 3314412 Wile-E-Coyote
Wile-E-Coyote's picture

Italy will be the next blood bath in Europe. There is no fixing this one..............then we have France.

Fri, 03/08/2013 - 13:25 | 3312555 Irelevant
Irelevant's picture

It depends on the definition of ok :)

Fri, 03/08/2013 - 14:31 | 3312800 H E D G E H O G
H E D G E H O G's picture

it's the ole pot (France), calling the kettle (Italy) black thingy.............fuck yEU eurozone........................

Fri, 03/08/2013 - 13:21 | 3312533 IridiumRebel
IridiumRebel's picture

Don't S&P on me or I may get Moody which will lead to you getting Fitchslapped!

Fri, 03/08/2013 - 13:29 | 3312582 a growing concern
a growing concern's picture

BBBitchslapped.

Sun, 03/10/2013 - 08:27 | 3316610 s2man
s2man's picture

Fitch slapped.  Way to coin a term, Tyler.  That one should stick.

Fri, 03/08/2013 - 13:21 | 3312535 HobbyFarmer
HobbyFarmer's picture

Best headline ever.

Fri, 03/08/2013 - 13:21 | 3312536 Peter Pan
Peter Pan's picture

Does one of those B's stand for Berlusconi?

Fri, 03/08/2013 - 13:25 | 3312549 IridiumRebel
IridiumRebel's picture

Berlusconi Bunga Bunga +

When it's America's turn it will be Ben Bernanke Bitchez +

Fri, 03/08/2013 - 13:28 | 3312576 McMolotov
McMolotov's picture

Downgrade BBB+itchez.

Fri, 03/08/2013 - 13:29 | 3312579 Peter Pan
Peter Pan's picture

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

Fri, 03/08/2013 - 13:41 | 3312626 IridiumRebel
IridiumRebel's picture

(Outlook Wanton)

Fri, 03/08/2013 - 13:42 | 3312640 Freddie
Freddie's picture

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.

Fri, 03/08/2013 - 14:20 | 3312756 DoChenRollingBearing
DoChenRollingBearing's picture

I agree.  And Italy has lots of gold (if they are not lying).

Fri, 03/08/2013 - 14:28 | 3312789 knukles
knukles's picture

LOL
Probably stored in London and FRBNYC
Good luck with that...

Fri, 03/08/2013 - 14:55 | 3312882 Boozer
Boozer's picture

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

 

Fri, 03/08/2013 - 15:43 | 3313022 riley martini
riley martini's picture

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.

Fri, 03/08/2013 - 13:22 | 3312537 Yen Cross
Yen Cross's picture

 And they didn't wait for the markets to close. Yet the Dow barely blinks. The market compacency is truly astounding!

Fri, 03/08/2013 - 13:24 | 3312548 SheepDog-One
SheepDog-One's picture

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.

Fri, 03/08/2013 - 13:27 | 3312554 Obchelli
Obchelli's picture

Do you know Mr Honey Badger?

Fri, 03/08/2013 - 13:37 | 3312618 americanspirit
americanspirit's picture

Are you talking this Mr. Honey Badger?  http://www.youtube.com/watch?v=4r7wHMg5Yjg

Fri, 03/08/2013 - 13:24 | 3312550 Obchelli
Obchelli's picture

Bullish

Fri, 03/08/2013 - 13:25 | 3312556 swissaustrian
swissaustrian's picture

So that caused the brief drop in equities and the spike in gold.

Fri, 03/08/2013 - 14:31 | 3312557 Edward Fiatski
Edward Fiatski's picture

But, but, but... I thought...

+5 for the title, Tyler

The road to EUR 1.28 is paved with +BBBad economic data.

Fri, 03/08/2013 - 13:26 | 3312561 Peter Pan
Peter Pan's picture

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.

Fri, 03/08/2013 - 13:28 | 3312564 CaptainSpaulding
CaptainSpaulding's picture

Where's Luca? 

 

Fri, 03/08/2013 - 13:30 | 3312584 McMolotov
McMolotov's picture

He sleeps wit da Fitches?

Fri, 03/08/2013 - 14:36 | 3312818 edifice
edifice's picture

Very punny.

Fri, 03/08/2013 - 14:37 | 3312819 machineh
machineh's picture

... after being cuckolded by the Fitchwife.

Fri, 03/08/2013 - 13:27 | 3312566 fonzannoon
fonzannoon's picture

I thought fitch promised not to downgrade any italians not involved in combat?

Fri, 03/08/2013 - 14:30 | 3312795 knukles
knukles's picture

Well they saw everybody talking and waving their hands about so figured....
(And I can say that being part Italian, Guidos and Guidettes)

Fri, 03/08/2013 - 14:38 | 3312825 machineh
machineh's picture

you toucha my bond rating, I breaka you face

Fri, 03/08/2013 - 13:27 | 3312568 Sach Mahoney
Sach Mahoney's picture

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?

Fri, 03/08/2013 - 13:27 | 3312571 fonzannoon
fonzannoon's picture

funny how this downgrade did not come after hours.

Fri, 03/08/2013 - 13:27 | 3312572 hugovanderbubble
hugovanderbubble's picture

SPAIN DOWNGRADED TO THE BIGGEST JUNK EVER

Fri, 03/08/2013 - 13:28 | 3312573 q99x2
q99x2's picture

The same people that own the banks own the ratings agencies. They're up to something no good.

Fri, 03/08/2013 - 14:33 | 3312806 magpie
magpie's picture

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.

Fri, 03/08/2013 - 13:31 | 3312588 Piranhanoia
Piranhanoia's picture

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.

Fri, 03/08/2013 - 14:31 | 3312799 knukles
knukles's picture

Insight of the Year
Kudos

Fri, 03/08/2013 - 13:32 | 3312594 digalert
digalert's picture

Only Grillo the comedian can save them...

Fri, 03/08/2013 - 13:35 | 3312604 dwdollar
dwdollar's picture

Total non-event... Any agency that gives Uncle Scam its highest possible rating doesn't have any credibility.

Fri, 03/08/2013 - 13:39 | 3312629 Al Huxley
Al Huxley's picture

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.

Fri, 03/08/2013 - 13:50 | 3312658 tuttisaluti
tuttisaluti's picture

I could'nt say it better. Thank's

Fri, 03/08/2013 - 16:47 | 3313200 Bingfa
Bingfa's picture

You downgrade em and your a threat to national security...

There's no limit to the bullshit stories the sheeple will buy....

Fri, 03/08/2013 - 13:37 | 3312616 observer007
observer007's picture

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

Fri, 03/08/2013 - 13:57 | 3312671 pirea
pirea's picture

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 %

Fri, 03/08/2013 - 14:02 | 3312691 McMolotov
McMolotov's picture

Beppe better be on the lookout for hot-tub heart attacks and/or visits from Signor Drono.

Fri, 03/08/2013 - 13:42 | 3312635 Trying to Understand
Trying to Understand's picture

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.

Fri, 03/08/2013 - 13:42 | 3312639 falak pema
falak pema's picture

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! 

Fri, 03/08/2013 - 13:44 | 3312646 Yen Cross
Yen Cross's picture

 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

Fri, 03/08/2013 - 15:55 | 3313054 No Euros please...
No Euros please we're British's picture

They should all be rated WTF -. IMHO

Fri, 03/08/2013 - 13:52 | 3312663 thismarketisrigged
thismarketisrigged's picture

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.

Fri, 03/08/2013 - 16:44 | 3313187 Bingfa
Bingfa's picture

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

Fri, 03/08/2013 - 14:00 | 3312683 the not so migh...
the not so mighty maximiza's picture

I am sure the average italian will just say bite my whopper

Fri, 03/08/2013 - 14:07 | 3312718 CheapBastard
CheapBastard's picture

"Fitchslapped?"

 

I think you made that word up.

Fri, 03/08/2013 - 14:34 | 3312811 Volaille de Bresse
Volaille de Bresse's picture

"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? 

Sat, 03/09/2013 - 08:42 | 3314553 Zwelgje
Zwelgje's picture

Whose poll?

Fri, 03/08/2013 - 14:41 | 3312830 yogibear
yogibear's picture

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?

Fri, 03/08/2013 - 14:49 | 3312860 orangegeek
orangegeek's picture

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.

Fri, 03/08/2013 - 15:29 | 3312985 the grateful un...
the grateful unemployed's picture

BungaBungaBunga + more Bunga

Fri, 03/08/2013 - 15:46 | 3313032 syntaxterror
syntaxterror's picture

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!

Fri, 03/08/2013 - 17:20 | 3313312 robertocarlos
robertocarlos's picture

Where's an iceberg when you need one.

Fri, 03/08/2013 - 17:36 | 3313350 Falconsixone
Falconsixone's picture

You just made the list Fitch......... Fahgettaboudit!........Yah.....But no........Your in big trouble.........The boss is not   gonna like this

Fri, 03/08/2013 - 17:41 | 3313369 Falconsixone
Falconsixone's picture

He likes his arrows to go up.....capeche?

Fri, 03/08/2013 - 17:44 | 3313383 Falconsixone
Falconsixone's picture

You don't wanna be know as Fitch the Snitch you change it...

Fri, 03/08/2013 - 17:46 | 3313388 Falconsixone
Falconsixone's picture

or else

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