Italy is out of the list of the countries at risk

According to Moody's rating the combination of the high public debt with a moderate growth, grants Italy away from important imbalance, such the once experienced in other European countries like Spain and Ireland.
The vulnerability of Italy has been included in rating Aa2 and does not forecasts new risks of instability. It has been stated by Alexander Kockerbeck, Moody's Analyst in charge of the evaluation of the Risk-Italy.
Ireland and Greece were stepped back in the rating, whilst Italy still maintains stabile position in Aa2 despite its debt/GDP above 100%. The question is if there is a margin to make support intervention to the Italian economy: with higher public expense or with tax reduction?

Mr. A. Kockerbeck thinks that there is no space to lower taxes in the next two years, and no way to help banks, although they didn't need any help. There are also no expectations that the economy will grow in a short time, with this kind of debt. The interesting reaction to the crisis that the Italian government is the "scudo fiscale" the fiscal shield and the fight against tax evaders, allowing a certain capital injection into the system. Even if in the near future the public debts will raise to incredible levels, never seen before, the structure of the Italian accounts is such to be apt to this situation of a high debt and a low growth, but in the mid-term a surplus return is needed to maintain the stability. In the past some EU countries lowered their debt, with an economic structure non sustainable, among them not Italy: they will have to manage their public accounts, and the high cost of the debt, beside revise their economic model. This problem is faced in the USA, GB, Ireland and Spain. The big challenge for the EU countries in 2010 will be the fiscal flexibility. The risk that the interests will rise, will bring a heavier cost of the debt. States heavier hit by the crisis, such as Greece, Spain, Ireland will not grow as they were doing before the crisis. Their public accounts are in a worst shape than they were before entering the Monetary Union. The EU is not only monetary union is also economic union: these economies will have to become more competitive.

Source: Il Sole 24 Ore_Jan 2010