The Meloni government and the market test. Analysts: "On the Def, image damage worries the delays of the Pnrr"

The Meloni government and the market test.  Analysts: "On the Def, image damage worries the delays of the Pnrr"


MILAN. In your two-day trip to London where you met with British Prime Minister Rishi Sunak, Meloni was observed in a special way by the markets which are waiting for reassuring messages on the solidity of our country. In the background there are financial worries after the recent comment by Moody's: the rating agency is allegedly thinking of downgrading Italian securities to the level of "junk bonds". Before that, the giant Goldman Sachs had said it preferred Spanish government bonds to Italian ones.

In the meantime, Italian politics seems to be rowing against: yesterday's slip of the government, which went before the House on the vote on the Def, comes at the most wrong juncture. "When one of the three rating agencies says that the only country that could be downgraded is Italy, it was necessary to close ranks and move forward and give the idea of ​​a united country ready to vote - says Giacomo Calef, Country Manager NS Partners -. It is an image damage that occurs just as Meloni was in London to offer a picture of solidity ».

The proof of the facts on the Pnrr

In the foreground is the Pnrr and the billions of funds still hanging in the balance. "To be credible, our country will have to make the most of the Pnrr - explains Giacomo Calef - These are investments that are linked to the structural reforms that Italy needs both to increase its competitiveness and productivity". Rome has long been committed to carrying out important reforms, such as the one on competition. For the expert, "losing Pnrr funds will mean missing the reforms that Italy has needed for decades and that Brussels has been asking for for years".

The Pnrr is central and in this phase the operators are waiting for indications on the future of this plan. «At the moment the theme is the Pnrr – says also Lorenzo Batacchi, equity and commodity portfolio manager at AssiomForex -. The market expects a cohesive majority that will proceed expeditiously and that will be able to make decisions on this matter in a short time». The expert explains that this is an extraordinary moment for the whole nation and the market warmly hopes that everything will be confirmed as soon as possible, that deadlines will be confirmed and that credible plans will be announced.

Growing GDP
Meanwhile, today's data on Italy's GDP, which grew by 1.8% yoy and more than expected in the first quarter, is comforting. «We are growing less than last year but we are growing – says Batacchi -. And the spread around 189 basis points is quite supportive and represents a very important calling card». According to the expert, there are no tensions at the moment. «And if Goldman Sachs says that Italy is worse than Spain, this will be seen – he says -. A lot will depend precisely on the Pnrr ».

In short, our country remains under special observation. But do operators see concrete risks approaching? «So far, international investors, as well as other EU countries and the USA, have positively evaluated the economic policies of the Meloni government. Just yesterday UK Prime Minister Sunak praised the "very careful management of the Italian economy". But this trust, due to a prudent budget, a constructive approach to Brussels and also simply a comparison with the previous populist governments in Italy, is now being tested by the facts, starting with the investments and the reforms of the Pnrr which instead seem to be in delay» says Alessandro Speciale, head of the editorial staff of Bloomberg in Rome.

In the meantime, Piazza Affari is losing ground today and records the worst performance in Europe with -1.30% just before 12.00. Weighing is the ballast of the banks with sharp drops for all listed Italian institutions. The whole European sector suffers. The Stoxx Banks index loses 2.5%. Reuters reports that two ECB board members, Frenchman Francois Villeroy de Galhau and his Dutch colleague Klaas Knot, said today that supervisors should consider changing the parameters on minimum provisions, in order to allow the financial system to be able to bear the stresses that led to the collapse of some regional banks in the United States. Knot explained that current liquidity coverage ratio (LCR) levels could be changed.

Ratings coming soon

In the evening, after the closure of Wall Street, the update of the assessment of the Italian Republic's creditworthiness by Dbrs will arrive, the current assessment of which is «BBB» (high) with a stable outlook. The market believes that an intervention on the rating is unlikely. For Moody's decision it will be necessary to wait for May 19th. Meloni's trip will also serve to send a reassuring message to the rating agencies.



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