Aug 31 (Reuters) - Credit rating agency Fitch on Friday cut the outlook on Italy’s sovereign debt to ‘negative’ from ‘stable’, citing expectations of looser fiscal policy that would leave the country’s debt more exposed to potential shocks.
Fitch kept its ‘BBB’ credit rating on Italy unchanged, and said the rating is still supported by the country’s diversified economy.
The move will pile pressure on the new populist government, in office since June, made up of the anti-establishment 5-Star Movement and the far-right League.
The new government has pledged to follow through on its electoral pledges to provide a minimum income for the poor, cut taxes and water down a 2011 pension reform.
Investors are concerned that slashing taxes and increasing welfare spending could increase the country’s mammoth debt and set the country on a collision course with its eurozone partners.
At an auction on Thursday, investors pushed Italy’s 10-year borrowing cost to its highest in over four years.
Reporting by Francesca Landini in Milan and Anuron Kumar Mitra in Bengaluru; Editing by Sriraj Kalluvila