EU leaders meeting in Brussels for their spring summit responded to criticism of austerity measures by agreeing to ‘structural’ budgetary assessments, that is, granting countries such as France, Spain and Portugal more time to bring their budget deficit under control. However, the EU still aims to have balanced budgets and there was no mention of large-scale spending programmes.
In the meantime, credit rating agency Fitch lowered Italy’s credit rating by one notch, citing the inconclusive election in February that has led to political uncertainty that undermines the country’s ability to respond to an economic downturn and the European debt crisis.
The rating agency downgraded the Italian sovereign bond rating to BBB+ from A- with a negative outlook, that is, three notches above junk status and one level higher than Spain’s.
According to Fitch, the ongoing recession in Italy is one of the deepest in Europe.
In the meantime, Italy’s GDP for the fourth quarter of 2012 confirmed that the economy remained deep in recession at the end of last year with a fall of 0.9 per cent quarter-on-quarter, and 2.8 per cent year-on-year.
Finally, there was more positive data-flow out of the US, where the labour market report came in much better than anticipated. Job growth came in at 236,000 and was the strongest since November.
The average job growth for the past six months stands at 196,000, despite the downward revisions of the two previous months.
In the meantime, the unemployment rate fell more than expected to 7.7 per cent from 7.9 per cent. However, this is still way above the Federal Reserve’s 6.5 per cent target rate but was enough to provide strong support for US Treasury yields, with the 10-year yields reaching 2.05 per cent.
This article was compiled by Bank of Valletta plc for general information purposes only.