Looks like the Italians voted for the "wrong" crowd.
Moody's Puts Italy On Downgrade Review, Junk Rating Possible
25 May, 2018
In a quite direct 'threat' to the newly formed Italian coalition, Moody's warned that Italy will face a downgrade from its current Baa2 rating (potentially more than one notch to junk status) due to the lack of fiscal restraint in the new "contract" and the potential for delays to Italy's structural reforms.
1. The significant risk of a material weakening in Italy's fiscal strength, given the fiscal plans of the new coalition government; and
2. The risk that the structural reform effort stalls, and that past reforms such as the pension reforms implemented in 2011 are reversed.
Mainstream political analysts have unleashed their doom-laden predictions about the impact of Italy's Five Star-Lega coalition, though their hostility is tempered by new-found concern for the "desperate," misguided electorate.
There is a storm brewing in Europe, and the winds of disunity and populism are blowing strong
Giuseppe Conte has been chosen by a coalition of two populist parties as its pick to be Italy’s next prime minister. The move could set Italy on a collision course with the EU.
Giuseppe Conte, a 54-year-old law professor and something of a political novice, was named as the pick to be Italy’s next prime minister by Five Star Movement (M5S) leader Luigi Di Maio.
Conte, who was born in the southern province of Foggia and has never been elected to parliament, comes from the M5S side of the coalition.
The now-likely coalition government in Rome made up of the M5S and League parties is on a possible collision course with other EU member states after it announced spending plans likely to increase the country’s already towering public debt.
What is in the coalition deal? The two parties agreed to give monthly payments of at least €780 ($920) to Italians living below the poverty line. The deal also foresees a maximum individual tax rate of 15 percent, while business would pay 20 percent at most. The platform includes the introduction of tougher rules on deporting migrants and calls for fostering dialogue with Russia on economic and foreign policy matters.
Why is the EU concerned? Italy is the third-largest economy in the EU, but is running public debt of more than 130 percent of GDP— second only to Greece. Economists and EU policymakers worry that the spending plans contained in the coalition’s program will increase the country’s debt burden still further. The coalition is also at odds with the EU over its pro-Russian stance and over its euroskeptic attitude, reflected in League leader Matteo Salvini’s “Italians First” motto.
In response to the bloc’s concerns, M5S’s Di Maio said “first let us govern, then you can legitimately criticize us.”