UPDATE 1-Scope maintains Italy’s debt rating, outlook in relief for Meloni govt

(Adds details from Scope statement and background throughout)

Dec 2 (Reuters) – Credit ratings agency Scope on Friday maintained its stance on Italy, citing the country’s relevance in European blocs and regional policy which would likely get the euro zone’s third-largest economy support from institutions if in distress.

Weak economic growth and high interest on the country’s huge debt are the main problems

facing Italian Prime Minister Giorgia Meloni

after her first year in power.

The European Commission last month forecast that Italy’s debt, proportionally the second-highest in the euro zone, would rise marginally from a projected 140% of national output this year to 141% in 2025.

While Scope maintained its “BBB+” rating and stable outlook on Italy, it highlighted challenges from the country’s “elevated, albeit declining fiscal deficits”.

It said that if Italy is seen as breaking the European Union’s recommendations on spending under

tighter new policies

in the coming years, Italy’s bonds may no longer be eligible for the European Central Bank’s (ECB) Transmission Protection Instrument (TPI).

The ECB last year unveiled

TPI

a new bond purchase scheme aimed at helping more indebted euro zone countries and preventing financial fragmentation within the currency bloc.

Scope’s views are critical as the ECB

said last month

it had decided to add Scope to its list of accredited ratings agencies for its monetary policy purposes, but the date from which this will become effective has still not been announced.

The ratings agency added that the Meloni administration’s backing of a

proposal

for a direct election of the prime minister could “challenge” recent political stability and raise tensions within the current coalition government.

Meloni’s coalition, the first led by a woman in Italy’s history, was

sworn in

last October after a sweeping election victory and will soon cruise past the 14-month average postwar term life for Italian governments.

Story continues

Scope’s bigger rival Moody’s last month left Italy’s sovereign debt

rating unchanged

but upgraded its outlook to “stable”, while S&P, DBRS and Fitch all left ratings and outlooks unchanged in their latest reviews. (Reporting by Pushkala Aripaka in Bengaluru and Gavin Jones; Editing by Arun Koyyur and Maju Samuel)