• Moody's: "Italy 2019 growth anemic, GDP up 0.4%"
  • Manovra, Moody's: tensions with the EU increase risks for Italy

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June 06, 2019It takes Europe's pressure on the Italian government "to adjust its economic policies" and the "deterioration of market sentiment will be more effective" to force Italy to meet the Commission on the road to an agreement. Today, the international rating agency Moody's presents a report on our country after the exchange of letters with the EU and while on Italy hangs the sword of Damocles of the feared infringement procedure. We need a "budget maneuver for 2020" that is effective "to give the right direction to the country on its credit class".

Reaction markets the most effective tool for agreement with the EU
Specifically, says Moody's, "the reaction of financial markets will probably be the most effective instrument, as happened last autumn when Italy and the European Commission found themselves in a similar confrontation" to the current one, always linked to "government fiscal policies" . At the time, the rating agency recalls, "the Italian government decided to adjust its fiscal deficit targets and defuse tensions with the Commission"; and even today, in fact, Prime Minister Giuseppe Conte and the leader of the 5 Star Movement, Luigi Di Maio, "have made reassuring statements about their intention to reach a compromise" with Brussels.

Moreover, according to the economy minister Giovanni Tria, Moody's goes on to say, "tax revenues were higher than the target in the first four months of the year" (ie they were higher than expectations), so "together with a less than expected absorption of the income of new citizens "(that is, minor expenses were incurred for the income of citizenship compared to the budgeted ones)," we can arrive at a budget deficit lower than the 2.4% expected for the current year "and therefore, more positive.

The debt will continue to rise
In any case, the agency expects that the Italian public debt will continue to rise over the next few years and notes "the absence, to date, of a credible strategy" that "continues to expose Italy to unfavorable changes in investor sentiment ". Following the loss of confidence in the possibility of investments in Italy, "The serious and adverse reaction of the market could further weaken growth, press the banking system and erode the fiscal force".

Maneuver under observation
Therefore Moody's continues to insist on the importance of the 2020 budget which will be a goal, perhaps the only one, able to "assess the direction of the solvency of the country".

Mini-Bot first step towards parallel currency and Italexit
The approval by the Parliament of a motion sponsored by the League, which asked to consider the issue of so-called Mini-Bot (small-cut and non-expiring Bot) "raises concerns", writes Moody's Investors Service in a note, stressing that "although the issuance of such securities is very unlikely, the fact that the proposal reappeared is negative credit", which is a negative factor on the rating of the country's rating, especially as "as pointed out by the Bank of 'Italy and the Ministry of the Treasury, there are more standard ways "to proceed. According to Moody's, "as already mentioned above, the issue of mini-Bot would be considered as a first step towards the creation of a parallel currency and a preparatory move for Italy to exit the Eurozone".