RPT-Fitch: Italian political turmoil puts fiscal targets at risk
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Sept 30 (Reuters) - (The following statement was released by the rating agency)
The potential collapse of Italy's ruling coalition government puts the sovereign's short- and medium-term fiscal policy targets at risk and creates uncertainty at a crucial period when the 2014 budget should be finalised.
Italy's ratings are based upon the medium-term fiscal trajectory of the Stability Programme, compliance with the constitutional balanced budget rule and the EU's reinforced Stability and Growth Pact (SGP). The ratings also reflect our judgement that Italy will retain market access and, if needed, EU intervention would be requested and provided to avoid unnecessary strains on sovereign liquidity.
As previously stated, prolonged uncertainty over economic and fiscal policies, reduced confidence that public debt/GDP will fall from 2014 and failure to comply with the constitutional requirement of a balanced budget are potential rating triggers for Italy's 'BBB+'/Negative rating.
If the political turmoil prevents the 2014 budget being presented to the European Commission on October 15 or Italy is unable to comply with the SGP requirements, then the availability of EU support, due to the conditionality of the ESM and OMT facilities, would also be less likely if it were required.
Prime Minister Enrico Letta is expected to present a plan to parliament on Wednesday and ask for a vote of confidence after Silvio Berlusconi withdrew his party's support following the decision to go ahead with a planned rise in VAT on October 1.