The Buzz | Ratings agency Fitch cuts Italy’s government debt grade

Ratings agency Fitch has cut Italy’s government debt grade, the first downgrade to a major economy to reflect the surge in public debt that is expected to hit countries dealing with the vast costs of the pandemic lockdown.
The agency yesterday lowered Italy’s rating by 1 notch to BBB- from BBB, just one level above junk bond status. It expects the virus outbreak to shrink the Italian economy by 8% this year and that there is a risk of a deeper downturn.
Italy has been one of the hardest hit by the outbreak of the new coronavirus — and is also one of the developed countries that can least afford its costs. Its public debt of 135% of annual GDP is forecast to rise to 156% this year, according to Fitch.
High debt can spook investors, who already are asking for higher rates to lend to Italy. The rates are still very manageable, but a rise to unsustainable levels could trigger a new financial crisis for Italy and Europe, where the country is part of the 19-nation euro currency union.