Authored by Marco Cattaneo, from Basta con l’Eurocrisi, via GEFIRA,
There is an increased talk in Italy about fiscal money as an instrument to resolve the economic crisis, which is not over yet.
Despite the optimism shown by the Italian government and the EU, the Eurozone economy is far from being in an acceptable condition, and this applies in particular for Italy.
Two weeks after the first, and biggest, European bank bail-in took place under the relatively new European bank resolution mechanism, the EBRD, when Spain's Banco Popular wiped out the holders of its most risky securities, including equity and AT bonds, and then selling what was left of the bank to Santander for €1 - a process that took place without a glitch - Italy may have just killed any hope of a European banking union, when the bailout of two small banks made a "mockery" of Europe's new regulation.
That Italy has a bank solvency problem will not come as a surprise to anyone who has been following events in Europe for the past 7 years.
Just yesterday, Italian daily La Stampa reported that four months after the third government bailout of Italy's third largest bank in as many years, the Italian government may have to inject even more cash than planned into Monte Paschi, the world's oldest and apparently always insolvent bank.
Moody's has cut Italy's long-term senior unsecuredd government debt rating outlook from 'stable' to 'negative', leaving it at Baa2 for now. Citing "slow and halting progress" on economic and fiscal reform in Italy, noting that reduction in Italy’s large debt burden will be further postponed given subdued medium-term growth prospects, recent fiscal slippage.
The drivers for today's rating action are:
Update: The market was modestly spooked as Transport Minister Delrio appeared to confirm Renzi's resignation will occur on a 'no' vote...
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