Italy’s Debt Woes
Dec 01, 2011 | 17:32 PM IST
Dec 01, 2011 | 17:32 PM IST
Macro Watch:Citing weak growth and insufficient deficit reduction measures, Standard & Poors downgraded the ratings for Italian National Bonds from A+ to A in late September, hence confirming and deepening Italys ongoing debt crisis. General government debt continued growing between 3.5% and 5.0% during the first half of 2011, despite recent government initiatives to eliminate the budget deficit by 2013. General government quarterly net borrowings continue to hover above EUR 10 billion since the third quarter of 2010, sowing doubt that the government can reduce its 119% debt to gross domestic product (GDP) ratio as of 2010. However, deficit reduction and austerity measures have been understandably slow and unpopular given global economic uncertainties. GDP growth was sluggish throughout 2011 at 1.00% and 0.82% GDP growth during the first and second quarters of 2011, consistent with the overall slowdown in the euro area.
Managing Italys Public Finances
Italys 10-year sovereign debt averaged 5.27% as of August 2011 with mixed market response after S&Ps announcements. However, the medium-term impact of the debt downgrade could see bond yields rising, leading to higher cost of borrowing for the Italian administration. This ultimately limits the administrations ability to execute economic stimulus to drive growth. At the same time, rising bond yields would see a greater share of government revenue spent on debt servicing, placing further squeezes on the administrations ability to manage growth expectations.
At Niveza India Pvt Ltd., we all come to work everyday to take the challenges of stock market head on and to change people's perception that stock market investment is like a gamble. Over the years, we have built our profile as a company which has brought optimum value to our subscribers through our well-researched stock recommendations.... More>>
Disclaimer: Niveza does not guarantee the accuracy or completeness of information on the site, nor does Niveza assume any liability for any loss that may result from reliance upon any such information or recommendations. Information and recommendations on the site are for general information only. Nothing contained herein is an offer to sell nor solicitation to buy any securities.