Tue, Apr 30, 2013 - Page 15 News List

Italy may still need bailout despite new government: report

NEGATIVE OUTLOOK:Moody’s says Letta’s government needs to show its commitment to huge structural reforms to restore its credibility

Reuters, MILAN, Italy

Ratings agency Moody’s believes Italy may still eventually need to seek a bailout, despite forming a new government and avoiding immediate crisis.

“We cannot yet rule out Italy will end up asking for help to the European Central Bank and the European Stability Mechanism,” Moody’s senior credit officer Dietmar Hornung was cited as saying in yesterday’s La Repubblica.

New Italian Prime Minister Enrico Letta’s government was sworn in on Sunday and the prime minister was to seek the backing of parliament in a confidence vote at 3pm yesterday.

Letta is expected to have the backing of his own center-left Democratic Party and former Italian prime minister Silvio Berlusconi’s center-right People of Freedom party, to break a stalemate that lasted about two months after February’s vote.

Hornung said Moody’s would monitor the ability of the newly formed government to overhaul the economy.

“We will have to verify the commitment of the new government and its ability to resolutely pursue the huge structural reforms the country needs to improve its creditworthiness,” Hornung said. “For now, the situation remains difficult.”

The ratings agency said on Friday it had kept Italy’s sovereign debt rating at “Baa2” thanks to the country’s reasonably low current cost of funding and its primary surplus.

However, Moody’s maintained its negative outlook for Italian sovereign debt because of the prolonged economic crisis.

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