Standard & Poor’s said Friday it may raise Italy’s credit rating from just above junk status if Premier Matteo Renzi’s government “wholly implements structural reforms” to boost growth and cut debt. But it could cut the rating if “rigidities in the labour market and the markets for goods and services persist” and fiscal consolidation stops, the agency said after announcing it was leaving Italy’s credit rating at BBB- and keeping its outlook stable.
It said that low competitiveness will crimp Italy’s recovery to a GDP rise of 0.4% this year and an average 1% over 2016-2017. It argued that the recovery was largely due to external factors.
The agency added that a recent Italian Constitutional Court ruling against a 2011 freeze on index-linked rises in some higher pensions had complicated the achievement of Italy’s budget targets. “In our opinion the 2015 budget consolidation is based more on interest rate reductions than on improvements in the primary balance,” it said. “(The pension ruling) complicates the achievement of budget targets”.