Italy's debt soars to 120pc of GDP
Milan, March 3, 2012
Italy's debt rose last year to 120.1 per cent of output but the annual deficit fell to 3.9pc, as the economy entered recession, official data showed.
Public debt was previously at 118.7pc of gross domestic product in 2010, the Istat data agency said, adding that the Italian economy grew 0.4pc overall in 2011, even though it contracted in the last two quarters of the year.
The Italian economy - the euro zone's third-biggest - has been under heavy pressure from several austerity plans adopted since 2010 in a bid to rein in public finances and reassure jittery financial markets.
The last austerity budget should restore a balanced budget by 2013.
The economy contracted by 0.3pc in the third quarter and by 0.7pc in the fourth quarter. The overall growth of 0.4pc fell below the government's expectation of 0.6pc last year.
Meanwhile, a Standard & Poor's (S&P) official told newspaper Il Sole 24 Ore for its yesterday's edition that Italy must lay the foundations for economic growth and get its debt under control to return to a sovereign 'A' rating.
Market confidence in Italy has improved after Italian banks, awash with cheap ECB funds, bought domestic bonds at recent sales, but Rome still has to roll over a mountain of debt in the first quarter alone.
In January S&P downgraded Italy's sovereign debt by two notches to 'BBB+' with a negative outlook, citing concerns over the euro zone debt crisis.
"The first step for Italy will be to take the outlook from negative to positive. And this will depend on the trend of debt, growth and the impact of the reforms implemented by the government," S&P's managing director for sovereign ratings in Europe, the Middle East and Asia Myriam Fernandez de Heredia told the newspaper.
"Reforms alone are not enough. It is important that they have a long-term impact on growth", she said.
"The time frame of our negative outlook is two years. This means Italy's outlook can change over the next 24 months. If Italy goes in the right direction, we will take this first step," she added.