Moody's says Italy may still eventually need bailout

April 29 2013 10:51 AM

RATING agency Moody's believes Italy may still eventually need to seek a bailout despite forming a new government and avoiding immediate crisis.

"We cannot yet rule out Italy will end up asking for help to the European Central Bank and the European Stability Mechanism," Dietmar Hornung, senior credit officer at Moody's, was cited as saying in Monday's told La Repubblica.

Prime Minister Enrico Letta's new Italian government was sworn in on Sunday and the premier will seek the backing of parliament in a confidence vote at 3 p.m. on Monday.

Letta is expected to have the backing of his own centre-left Democratic Party and former prime minister Silvio Berlusconi's centre-right People of Freedom party, to break a stalemate that lasted around two months after February's vote.

Hornung said Moody's will monitor the ability of the newly formed government to overhaul the economy.

"We will have to verify the commitment of the new government and its ability to resolutely pursue the huge structural reforms the country needs to improve its creditworthiness,"

"For now the situation remains difficult," Hornung said.

The ratings agency said on Friday it had kept Italy's sovereign debt rating at Baa2 thanks to the country's reasonably low current cost of funding and its primary surplus.

But Moody's maintained its negative outlook for Italian sovereign debt because of prolonged economic crisis.