GLOBAL FINANCIAL CRISIS:ITALIAN PRIME Minister Silvio Berlusconi yesterday strongly defended his government in the wake of the decision by ratings agency Standard and Poor's to downgrade Italy, reducing its sovereign debt rating from A+/A-1+ to A/A-1.
In a report issued late on Monday night, S&P had questioned the “government’s ability to respond” to the current euro zone crisis.
“The lowering of the long- and short-term sovereign credit ratings on Italy reflects our view of the Italian economy’s weakening growth prospects and our view that Italy’s fragile governing coalition and policy differences within parliament will likely continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P analysts wrote.
Mr Berlusconi substantially rejected those criticisms and defended the stability of his parliamentary majority.
“The government has won every confidence vote in parliament, thus showing that it has a stable majority,” said Mr Berlusconi. “Standard and Poor’s ratings seem based more on a reading of the daily papers than on the reality of things and they are flawed by political considerations.”
The US agency, however, defended its assessment of the Italian economy, saying it had been based on “a detailed and independent analysis of the economic and fiscal prospects for Italy” and not on “political prejudices”.
While S&P acknowledged obvious strengths in the Italian economy such as a “high level of per capita GDP” and “strong household and corporate balance sheets”, the agency expressed concern about “weakening . . . growth prospects” partly brought about by “significant political impediments to growth-enhancing reforms”.
S&P also underlined Italy’s high debt levels as well as its “limited commitment to expenditure cuts under the current medium-term fiscal programme”.
If the ruling centre-right majority were critical of the downgrade, opposition forces immediately seized on it as further reason to repeat their calls for Mr Berlusconi’s resignation.
Pier Luigi Bersani, leader of the main opposition, the Democratic Party, said: “We absolutely have to act fast, there’s no time left. We have to get out of this swamp, these quicksands . . . and get the country going again . . . Berlusconi should clear off and let the country deal with its problems”.
The downgrading prompted an unusually tough statement from Emma Marcegaglia, head of the Italian Confederation of Industry.
“There’s no time left. Either the government is capable today, or next week, of presenting a number of serious, weighty and unpopular measures, then good,” said Ms Marcegaglia. “Otherwise, and I’m not frightened to say it, this government should resign . . . Italy is a serious country but we are fed up with being an international laughing stock.”
Despite S&P’s move, the Milan bourse held up well yesterday with Italy’s benchmark FTSE MIB Index closing up 1.69 per cent, even if the infamous “spread” differential between German and Italian government bonds remained high at 392.8 points.
