Moody's Could Downgrade Italy to Junk This Week, Raising Controversy and Pressure on ECB
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Moody's could downgrade Italy to junk this week, which would be highly symbolic and controversial. A downgrade could cause bond yields to spike.
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Moody's has highlighted issues with Italy's sluggish growth, high borrowing costs, and loosened fiscal discipline. Its debt-to-GDP ratio remains very high.
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Moody's view is more negative than other rating agencies. A downgrade would put an unusual gap between their ratings.
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Italy's finances look more sustainable than some G7 countries that Moody's rates higher, like Japan and the UK.
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A downgrade could pressure the ECB to use its crisis tools to contain turmoil in Italian bonds. The ECB wants countries to reduce debt.