Halister News

(Bloomberg) -- A “yes” vote at the Constitutional referendum would be a “game changer” for Italy as it would make it easier to pass the legislation through Congress and reduce the political party system’s fragmentation, according to Fergus McCormick, DBRS co-head of global sovereign ratings.

• One of Italy’s main problems has been its inability to pass reform legislation quickly, McCormick says in interview in London
• Referendum outcome remains unclear given high number of undecided voters; the economy is decelerating and some voters may use the vote to voice discontent
• If referendum passes, it would be “very, very good news” as it has the potential to turn around sentiment and investor confidence
• A “no” vote would lead to political instability and wouldn’t play in favor of growth, which is already low
  • Italy has a high number of NPLs, which compounds the problem of low growth
  • In the event of a “no” vote, DBRS wouldn’t take any “knee jerk” reaction; any Italy collapse unlikely as economy is still resilient
• NOTE: Fitch sees risks to Italy rating from referendum while Moody’s says fewer reforms would put downward pressure on rating; see referendum roundup