Italy Threatens to Sue Standard & Poor’s over Downgrade

Italy has threatened to sue Standard & Poor’s (S&P), claiming that a damaging downgrade issued by the credit ratings agency (CRA) failed to take account of the country’s historical and cultural treasures.

A report in the
Financial Times
states that Italy’s auditor general, the
corte dei conti
, believes that S&P may have acted illegally and could be sued for €234bn. The
FT
cites a letter from the
corte dei conti
notifying S&P that it is considering legal action for paying too much attention to Italy’s budget deficit.

“S&P never in its ratings pointed out Italy’s history, art or landscape which, as universally recognised, are the basis of its economic strength,” the letter alleges. S&P has responded by describing the claims as “frivolous and without merit”.

A promised investigation by the Italian prosecutor into S&P’s decision is likely to focus on the CRA’s downgrade of Italy’s credit rating in January 2012 by two notches to BBB+, one of several eurozone downgrades at that time.

Mario Monti, who was then newly installed as Italy’s prime minister, described the downgrade as “a further problem as it makes certain investments impossible”. The downgrade confirmed that the epicentre of the financial crisis had moved to Italy, and the cost of Italian borrowing soared in subsequent weeks.

S&P said the downgrades were necessary because European leaders were failing to deal with their debt problems, while eurozone leaders accused the CRA of failing to understand the measures they had agreed to calm the crisis.

Similar complaints are being leveled at S&P’s rivals Moody’s and Fitch, with further details expected to be revealed by the
corte dei conti
on 18 February. However, Moody’s dismissed the allegations, while a spokesman for Fitch said: “As we understand the prosecutor’s concerns, we believe Fitch at all times acted appropriately and in full compliance with the law.”

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