Italy's crisis mustn't delay budget-rating agency DBRS
MILAN Oct 1 (Reuters) - Italy must ensure that its political turmoil does not delay approval of next year's budget law, a senior official at ratings agency DBRS said on Tuesday, adding the prospect of a political stalemate that stalled necessary reforms would be worrying.
DBRS's stance is particularly important because among the four agencies whose ratings the European Central Bank uses to set collateral for banks' funding, it assigns Italy the highest mark. This means that a downgrade below the single-A threshold would force Italian lenders to post larger amounts of government bonds to borrow from the ECB.
"We expect the timely approval of the 2014 budget by the Italian Parliament. Its content will be one of the key factors that we will consider in our analysis," Giacomo Barisone, Senior Vice President at DBRS' Sovereign Ratings Group, said in emailed comments in answer to Reuters' questions.
He said Italy's current rating with a negative trend already factored in political risks.
"What concerns us is that with a high and rising level of government debt of 132 percent of GDP in 2013 and the ongoing macroeconomic weakness, the lack of progress in structural and institutional reforms due to a political paralysis may further delay the economic recovery," he said.
Italian Prime Minister Enrico Letta faces a vote of confidence in parliament on Wednesday after centre-right leader Silvio Berlusconi ordered five ministers to resign, leaving the country without a fully operational government.
The government must present next year's budget law by mid-October. Italy's 2013 deficit is running above the 3 percent of output limit set by the European Union and Rome was due to adopt corrective measures before the latest political impasse.
However, Barisone said any fiscal slippage was likely to be contained and noted that Italy's 2013 primary surplus of 2.4 percent of gross domestic product remained stable and one of the highest among all single-A rated sovereigns.
On Monday, Fitch Ratings said prolonged uncertainty over Italy's economic and fiscal policies could threaten the country's 'BBB+' sovereign rating.
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