2018: Italy dis-credited

We said:

The slow-motion confrontation with the EU Commission will drag on well into next year. Higher cost of funding and higher taxes for banks next year will hurt credit. Lack of contagion means Italy is the only major EA “peripheral” country left. 

More debt and no growth. A wealth tax on property, levies on bank deposits and a serious spending review are political non-starters. So, we expect S&P to change Italy’s outlook to negative on Friday in anticipation of a downgrade (together with Fitch) in Q1 next year, which is already priced in. We also stick to our view that the fiscal multipliers for Italy are very small, if not zero. Any stimulus from the budget (estimated at around 0.2% of GDP) will be offset by deteriorating credit conditions for households and firms.

More importantly, however, the definition of the EA periphery seems to have changed. Spain and Portugal have come a long way since the EA debt crisis. Not only have they addressed their pressing structural problems, but they have also caught up on growth. With the exception of Greece, a special case, Italy remains the only true EA laggard. We don’t think the ECB will do anything in the short run that could be seen as a favour to Rome, but in the long term the continued divergence of Italy (especially vis-à-vis Germany) will be the greatest challenge facing the EA and its central bank.


S&P downgraded their outlook to negative in October 2018. In Q1 2019 the ECB was pushed into action to introduce a new round of TLTRO's primarily to support the Italian banking system. 


18 May 2018
02 Feb 2005
01 Sep 2004
12 Aug 2004
05 May 2004
20 Jul 2000
01 Apr 1999
06 Jan 1999
01 Sep 1997
06 Jun 1995
10 Feb 1994
10 Mar 1993
06 Feb 1992
10 Dec 1991
03 Jan 1990



15 Apr 2016
16 Oct 2015
25 Nov 2013
20 Dec 2012
20 May 2004
03 Jul 2001


View our summary videos on fast trending topics. To listen to a recording of our Conference Calls, please get in touch with zdl@tslombard.com


Track Record

We have a 30 year track record of successful calls. Many of these calls combined economic, political and market analysis.



To request an interview with a member of our team, please get in touch zdl@tslombard.com .



Client Login

Don't have an account? CREATE YOUR ACCOUNT