MILAN, Feb 14 (Reuters) - Moody’s has lifted its outlook on Italy’s “Baa2” government rating to stable from negative, signalling a possible change in sentiment towards the country’s sovereign debt since the start of the euro zone crisis.
In a statement on Friday, the ratings agency said the outlook change reflected the resilience of Italy’s government financial strength as well the reduction of risks for Italian government’s balance sheet stemming from contingent liabilities.
Moody’s expects Italy’s debt-to-GDP ratio to peak this year at below 135 percent and said Prime Minister Enrico Letta’s resignation and expectations that centre-left leader Matteo Renzi will head a new government does not change its expectations.
Moody’s said the risks related to the Italian banking sector’s potential recapitalisation needs are now more limited and said it may upgrade Italy’s rating if the economy improves on the back of structural and labour market reforms.
Renzi could be named prime minister as soon as this weekend after his centre-left Democratic Party (PD) leadership forced party rival Letta to resign after 10 months in power. (Reporting by Danilo Masoni, editing by Lisa Jucca)