WORLD
Moody`s to conclude Italy review within month
Baku, September 17 (AZERTAC). Moody`s Investors Service on Friday said it would finish reviewing Italy`s Aa2 sovereign currency credit rating for possible downgrade within the next month, adding Italy faces a challenging economic and financial environment, Reuters reports.
Moody`s put Italy`s rating on review in June and as the original 90-day review period drew to a close this week, Italian and French bank shares fell sharply on fears of a ratings cut.
The stocks of France`s BNP Paribas and Credit Agricole and Italy`s UniCredit shed 7.0 percent each on Friday even though the overall market was higher for a fourth straight day. Investors fear a downgrade would hurt banks with large holdings of Italian government debt.
Italy, the euro zone`s third largest economy, has been hammered over the past two months by financial markets increasingly concerned by its combination of massive public debt and a stagnant economy.
"In light of the increasingly challenging economic and financial environment and fluid political developments in the euro area, Moody`s is continuing to evaluate Italy`s local and foreign currency bond ratings in the context of the risks identified," the agency said in a statement.
"Moody`s will strive to conclude the review within the next month," it said.
The original Moody`s review in June and a similar review by rival ratings agency Standard and Poor`s helped focus market concern over Italy, which has had one of the world`s slowest growing economies over the past decade.
Moody`s cited structural economic weaknesses such as a rigid labour market, rising debt financing costs and risks to a plan to reduce Italy`s overall debt burden.
As well as slow growth, Italy has one of the largest public debt burdens in the world, equivalent to about 120 percent of gross domestic product. After Greece, that is the largest ratio in the 17-country euro zone.
Until last spring, Italy stood largely on the sidelines in the euro zone debt crisis, insulated by a relatively modest budget deficit, a high rate of private savings and a generally conservative financial and banking system.
But while it has not followed Greece, Ireland and Portugal in seeking emergency aid, it has faced sharply increased borrowing costs as debt worries have spurred investors to demand higher returns to buy its government bonds.