The debt of the country reached a peak of more than four years this week and the risk to Portugal and Spain rose to the highest ever. The coalition of the anti-Eurosystem and the Eurosceptic parties 5-Star Movement and League threaten to run up against Brussels on the budget plans for next year. And that means that investors and credit rating agencies lag behind with one foot in comparison with the Italian debt.
Fitch relegated the Italian rating from stable to negative on Friday. The office justified the decision. He warned that "the risk of reversing structural reforms with a negative impact on Italian credit fundamentals has increased" and found that "fiscal and political risks also contribute to a high degree of political uncertainty." Fitch retained the BBB rating (two levels above waste). It is the same letter that you give to Portugal.
These fears are also demonstrated by investors. Only in June, the latest data released by the Bank of Italy and quoted by Reuters, foreign investors took more than 30 billion Italian debts. This flight has led to more and more interest being asked to finance Italy.
This week, Rome paid the highest interest rates in the last four years to secure a five and ten year financing. And news has come to the fore, not officially confirmed, that to face Roma will have been the pressure to ask Trump for help and urged the European Central Bank to continue to buy debts.
On the secondary market, and even before Fitch's decision, investors demanded a rate of 3.24% to buy an Italian debt of 10 years. For Portugal the required interest is 1.92%. The difference between the rates of the two countries is close to the historical highlights.
Despite the uncertainty about the budgetary measures that the Italian coalition will take and its impact on public finances, there are banks that bet that the Italian debt can recover from the Portuguese. In a note to which Live Money had access, the German Commerzbank noted that "the risk premiums of Italy in the periphery are historically high compared to Spain and Portugal." But banks state that "at these levels we see potential [da dívida italiana] especially against Portugal, which is most likely to be exposed to contamination "as the instability increases.