MILAN Dec 13 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 centre-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 centre-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
The agency said a return of Monti to government would
strengthen Italy's commitment to a balanced budget and reforms
aimed at boosting competitiveness.
"The possibility remains that Mr Monti could return to the
prime minister position, either as a candidate in association
with the centrist movement or ... if parliament instead opts for
a second term technocrat administration. We would expect such an
outcome to also be conducive to continuing reform," it said
Italian borrowing costs eased on Thursday, reversing part of
the rise seen after Monti announced his intention to resign.
The premium Italian 10-year BTPs pay over safer German
equivalent bonds tightened to around 325 basis
points earlier on Thursday, back to the level seen before
Monti's early exit announcement.
Italy is expected to find buyers for 3.5 billion euros of a
new BTP bond maturing in December 2015 that is putting up for
sale at 1000 GMT on Thursday, along with a maximum 750 million
euros of a 15-year bond which it no longer issues on a regular