Italy Downgraded

The French and Chinese are ganging up on Italy, I wonder why with the recent elections throwing the entire Euro integration plan in to the sea.

Fitch just downgraded Italy to BBB+ / Outlook Negative and of the four reasons why they downgraded them, can you guess which one was first given the timing of the downgrade?

KEY RATING DRIVERS

The downgrade of Italy's sovereign ratings reflects the following key rating factors:

• The inconclusive results of the Italian parliamentary elections on 24-25 February make it unlikely that a stable new government can be formed in the next few weeks. The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession.
• Q412 data confirms that the ongoing recession in Italy is one of the deepest in Europe. The unfavourable starting position and some recent developments, like the unexpected fall in employment and persistently weak sentiment indicators, increase the risk of a more protracted and deeper recession than previously expected. Fitch expects a GDP contraction of 1.8% in 2013, due largely to the carry-over from the 2.4% contraction in 2012.
• Due to the deeper recession and its adverse impact on headline budget deficit, the gross general government debt (GGGD) will peak in 2013 at close to 130% of GDP compared with Fitch's estimate of 125% in mid-2012, even assuming an unchanged underlying fiscal stance.
• A weak government could be slower and less able to respond to domestic or external economic shocks.