MercoPress. South Atlantic News Agency

“Negative political considerations” downgraded Italy’s rating says Berlusconi

EC supports Berlusconi’s austerity measures to help manage the budget and national debt

Italian Prime Minister Silvio Berlusconi was quick to reject a long-feared assessment from ratings agency Standard & Poor’s that saw Italy’s credit rating downgraded by one notch on Tuesday.

Berlusconi said the assessment “seemed dictated more by newspaper stories than by reality and appeared to be negatively influenced by political considerations.”

In Brussels, the European Commission avoided criticizing the S&P downgrade. But the EU did support Italy’s austerity measures, saying the country would manage to pay off its sovereign debt by 2013.

Last week, the Italian parliament approved a number of austerity measures, including higher taxes, pension reform and spending cuts which, it’s said, will reduce Italy’s deficit by more than 54 billion Euros over the next three years.

EU Commission spokesman Amadeu Altafaj said he did not think the austerity measures would stunt Italy’s much-needed growth.

“Unfortunately, some member states cannot afford the luxury of expansive fiscal policies to support the economic activity,” said Altafaj.

“In the case of Italy, the fiscal space is relatively small and it is very important that fiscal consolidation sets the ground for sustainable growth,” he said.

But the EU Commission spokesman did echo Standard & Poor’s belief that Italy needs urgent political reform.

“It is essential that the country pursues a bold reform agenda with comprehensive measures to tackle the deep-rooted structural weaknesses of the economy,” said Altafaj, “so, there is a clear need […] to implement an agenda of growth as a matter of urgency.”