October 10, 2018 / 8:08 AM / a year ago

Italy debt downgrade possible given current climate - lawmaker

ROME (Reuters) - A downgrade of the Italian debt by credit rating agencies is possible, a prominent lawmaker of the ruling League party said on Wednesday, as market concern over the financial sustainability of the government budget targets mounted.

The populist coalition, made up of the right-wing League party and the anti-establishment 5-Star Movement, has set next year’s deficit at 2.4 percent of gross domestic output, three times the forecast of the previous centre-left administration.

The plan has drawn criticism from the European Commission and has triggered a sharp rise in yields on Italian government bonds.

“A downgrade is possible given the climate that has been created,” Alberto Bagnai, chairman of the Senate’s finance committee, said in an interview with Radio Capital.

Standard & Poor’s, which rates Italy’s debt “BBB” with a stable outlook, is scheduled to review its rating on Oct.26.

Moody’s, which has a negative outlook on Italy’s Baa2 rating, has said it would pass judgement by the end of October.

Italy’s budget plan is a “mistake”, and the projected rise in deficit and debt is on the radar screen of all the ratings agencies, Mark Zandi, chief economist at Moody’s Analytics, told La Stampa newspaper in an interview.

“Certainly what we hear is not a plus for Italy’s fiscal outlook,” Zandi said. In the same interview, Zandi said he was not personally involved in deciding Italy’s credit rating.

Reporting by Giselda Vagnoni, editing by Steve Scherer

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