Little credit impact from Italy political storm: Moody's

Thu Dec 13, 2012 4:57am EST
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MILAN (Reuters) - Moody's said on Thursday political turmoil stemming from the announced early departure of Prime Minister Mario Monti would have limited impact on Italy's sovereign credit rating.

It added that it expected the next government to continue on a reform path.

The agency, which has up until now taken a harsher stance on Italy than ratings peers Fitch and Standard & Poor's, said it expected a new government to stick to the main elements of the 2013 budget law, which parliament is to pass before year-end.

Monti, an unelected caretaker called in a year ago to help Italy survive a deep financial crisis, decided to resign after losing support from Silvio Berlusconi's center-right party last week. He will quit as soon as the budget law is approved.

General elections are now expected in February, a few weeks earlier than what was originally planned.

The agency rated as low the chances of a Berlusconi return as prime minister, a prospect that sparked some market concern earlier this week. Berlusconi's party is lagging the center-left Democratic Party (PD) by around 15 percentage points in polls.

Meanwhile, a victory of the PD led by Pierluigi Bersani would likely result in a pro-reform government, it said.

"We expect he will maintain a reform-oriented policy agenda," Moody's said in a research note. Moody's rates Italy's sovereign debt Baa2, two notches above junk, with a negative outlook.

The agency said a return of Monti to government would strengthen Italy's commitment to a balanced budget and reforms aimed at boosting competitiveness.   Continued...

Italy's Prime Minister Mario Monti gestures at the World Policy Conference in Cannes December 8, 2012. The World Policy Conference is devoted to the issue of global governance in all its aspects and takes place from December 7 to 10. REUTERS/Eric Gaillard