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Fitch Ratings on Monday affirmed Italy's long-term foreign and local currency Issuer Default Ratings at 'AA minus', with a stable outlook. It also affirmed the short term foreign currency rating at 'F1+' and the country ceiling at 'AAA' , in line with the common country ceiling for euro area sovereigns.
Fitch said Italy was relatively insulated from the direct fall-out of the global financial crisis, with banks' heavy reliance on retail funding, low leverage ratios and a traditional banking approach helping it to weather the subprime crisis. At the same time, asset quality was deteriorating due to the recession and exposure in eastern Europe, it said.
Fitch's Brian Coulton said ", Italy has in some ways fared better than advanced country peers through the crisis, with limited intervention to support the financial sector and a relatively modest widening in the fiscal deficit, thanks partly to the authorities decision to adopt a fiscally neutral stimulus package."
However, the country's structural fiscal weakness remained and Fitch said it would be crucial for Italy to re-invigorate medium term fiscal consolidation plans in the aftermath of the global crisis.
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