Moody’s Upgrades Italy’s Credit Rating for First Time Since 2002

In a landmark shift for Europe’s third-largest economy, Moody’s Ratings upgraded Italy’s sovereign credit score for the first time in more than two decades, delivering a decisive political and economic win for Prime Minister Giorgia Meloni.

The agency raised Italy’s rating one notch to Baa2 from Baa3, restoring a buffer above junk territory and assigning a stable outlook. The move ends years of anxiety in Rome, where the specter of a downgrade to speculative-grade debt had loomed since the eurozone sovereign crisis.

Moody’s attributed the upgrade to a “sustained record of political and policy stability”, paired with economic and fiscal reforms under Italy’s National Recovery and Resilience Plan.

The rating firm had long been the most skeptical among major agencies, maintaining its lowest-in-the-G7 assessment even as Italy’s political climate grew calmer under Meloni’s leadership. The decision to upgrade now, nearly halfway through her term, marks a notable reversal of the negative trajectory the country faced just two years ago.

During the coalition government led by Giuseppe Conte in 2018, Moody’s cut Italy to Baa3, the last rung above junk. By mid-2022, Italy’s outlook had slid to negative, signaling the risk of a downgrade that could have rattled bond markets and complicated government borrowing.

Meloni’s administration, however, pushed through measures to stabilize public finances and begin narrowing a ballooning budget deficit, work that ultimately shifted Moody’s stance in late 2023, paving the way for this year’s full upgrade.

Italy still carries the eurozone’s second-largest public debt load, hovering above 130% of GDP. Yet Moody’s now expects that burden to begin declining gradually from 2027, reflecting disciplined fiscal policy and ongoing reforms. The government is targeting a return to the European Union’s 3% deficit threshold this year, a milestone that would remove Rome from the bloc’s enhanced fiscal monitoring regime.

Finance Minister Giancarlo Giorgetti hailed the upgrade as proof that Italy’s economic strategy is gaining traction.

“It is further confirmation of renewed confidence in this government, and in Italy,” he said.

Moody’s is the fourth major agency to bolster Italy’s credit standing in 2024.

S&P Global Ratings raised Italy earlier this year. Fitch followed with its own upgrade in September.

Smaller agencies, including Morningstar DBRS and Scope Ratings, went even further, granting Italy its strongest evaluations in years.

Despite the positive momentum, Moody’s rating remains at least one notch below its peers.

The upgrade gives the Meloni government new breathing room. But with a heavy debt load and sluggish economic expansion, Italy’s challenge now will be preserving this momentum long enough to translate political stability into lasting financial resilience.