Moody's monitoring Italy, says may need ECB help

Rating agency still concerned after Letta govt sworn-in

Moody's monitoring Italy, says may need ECB help

Rome, April 29 - Moody's has said it is monitoring the situation in Italy after Premier Enrico Letta's left-right government was sworn in at the weekend and it warned the new administration may have to seek help from European Central Bank (ECB) if borrowing costs rise. The rating agency said it had concerns about whether the government will be able to deliver the reforms it deems necessary to revive the Italian economy, which is enduring its longest recession in 20 years after a decade of sluggish growth. Letta's apparently unnatural coalition sees his centre-left Democratic Party working with its long-standing adversary, ex-premier Silvio Berlusconi's centre-right People of Freedom (PdL), as well as former premier Mario Monti's Civic Choice party. "We cannot yet rule out the possibility that Italy will end up asking for help from the European Central Bank and the European Stability Mechanism (bailout fund)," Dietmar Hornung, senior credit officer at Moody's, told Rome-based daily La Repubblica. Hornung added that Moody's will closely monitor the work of the new government, which faces a confidence vote in the Lower House later on Monday. Moody's said on Friday it had kept Italy's sovereign debt rating at Baa2 as the country's borrowing costs were relatively low at the moment. But it kept its negative outlook for Italian sovereign debt because of the prolonged recession.

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