Rating agencies urge Italy to stay on reform path

FXstreet.com (Barcelona) - The inconclusive outcome of the Italian election is still in focus on Wednesday. The possibility that a coalition government will be formed boosted sentiment and the Italian debt auction held in the European morning went quite smoothly.

Moody’s and Standard and Poor’s rating agencies also commented on the situation in Italy, suggesting that the decisions of the new government will influence the credibility of the country’s sovereign debt. In case of holding back the reform plan initiated by Mario Monti’s cabinet, Italian rating might be subject to a downgrade.

Nevertheless, both Moody’s as well as Standard and Poor’s decided to leave the Italian rating intact, at Baa2 and BBB+, respectively. The former also said that calling new elections would not solve the situation.

Also European Council President Herman Van Rompuy stressed that carrying on with reforms is a necessary condition for Italy to get out of the crisis, even though the worst is already behind us: “We should not become complacent - neither in Member States nor at the level of the European Union and the euro zone. There is no real alternative to keep up reforming our economies.”

On Wednesday evening European Commission President José Manuel Barroso will meet Italian PM Mario Monti to discuss the outcome of the elections.

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