Moody’s downgrades Sicily to Baa3

Moody’s Investors Service has downgraded the long-term issuer and senior unsecured debt ratings of Italy’s autonomous region of Sicily to Baa3 from Baa2 with possible further downgrade, as the region faces increasing budgetary pressures.

Moody’s will review the rating based on Sicily’s liquidity and anticipated cash-flow position over the next several months, and the credibility and effectiveness of any recovery action, either self-imposed or enforced by the central government, the rating agency said.

The decision follows Italy’s government decision to transfer an aid of €400m to the region, with forthcoming additional resources to be allocated to support the local government.

Over the last days Sicily said it will delay paying salaries to regional parliamentarians and postpone pay-outs to pensioners until the region receives the money from the central government.

At the end of 2011, Sicily had €5.3 billion in net direct debt and an unemployment rate of 19.5%, almost twice the national average.

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