Daily Archives: September 20, 2011

Peter Spiegel

Italian prime minister Silvio Berlusconi during last week's vote on new austerity measures

What ails Italy?

If one reads into the minutiae of last night’s Standard & Poor’s downgrade of Italian debt, it wouldn’t be hard to come away thinking that there was not a whole lot wrong with the eurozone’s third largest economy. It’s a “high-income sovereign with a diversified economy and few external imbalances”, S&P notes.

In addition, private sector debt – which crippled Ireland and Spain, when those debts moved onto government books via bank bail-outs – is low. Left unsaid by S&P (but highlighted by Moody’s when it announced its own review in June) is the fact Italy also has a primary budget surplus, which means it actually brings in more money than it spends, if you don’t count interest payments on debt.

According to S&P, then, what ails Italy is as much political as it is economic. Read more