Italian borrowing costs rose in early trade on Monday after DBRS cut Italy’s credit rating, warning that the country’s government has not taken a “systemic approach” to its banking crisis.
DBRS cut Italy’s sovereign credit rating to BBB (high) from A (low) after market close on Friday in a move that will mean Italy’s banks must pay more to borrow money from the European Central Bank when they use the country’s bonds as collateral.
Speaking to CNBC later Monday, Fergus McCormick, Co-Head of Sovereign Ratings and Chief Economist at DBRS said the move was a long term view and the discomfort began to grow in August last year.
“Unlike Ireland and unlike Spain, Italy has not taken a systemic approach to solving its problem,” McCormick told CNBC.
McCormick added that Italy’s banking sector was a victim of low economic growth as well as political uncertainty and therefore it was hard to see if the Italian banking system is at its lowest point.
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