Former premier Mario Monti
testified for the prosecution Friday at a trial into alleged
market manipulation by ratings agencies Standard & Poor's and
Fitch.
In October 2014, prosecutors in the Puglia city of Brindisi
indicted five managers and analysts from Standard & Poor's (S&P)
plus the agency itself on charges of deliberately misleading
financial markets with reports on Italy.
S&P in January 2012 downgraded Italy from A to BBB+, and
Corriere della Sera reporter Marco Galluzzo cited Monti as
saying at the time that the move was tantamount to "an attack on
Europe".
Monti however denied saying those words in a 2014 statement
to prosecutors.
Also testifying for the prosecution are former S&P Italy
CEO Maria Pierdiccchi, and Galluzzo.
Pierdicchi allegedly said in a 2011 wiretapped conversation
that S&P analysts weren't capable of managing Italy's ratings.
"I wasn't referring to their analytical skills, but to
their mental and psychological endurance" due to the fact that
S&P analysts in Greece and Spain had gotten death threats at the
time, she explained today on the stand.
"Downgrading a country causes negative consequences," Monti
said today on the stand.
The case follows a lawsuit stemming from 2011-2012 reports
questioning Italy's creditworthiness and lowering its rating.
The reports in question were issued between May 2011 and
January 2012, at the height of the eurozone debt crisis when
Italy looked to be in danger of a Greek-style financial
meltdown.
They included a report issued on January 13, 2012, in which
the United States-based S&P downgraded Italy's sovereign debt
rating by two notches from A to BBB+.
That same day, S&P also lowered its rating on several
Italian banks in findings that another employee at the ratings
agency disagreed with in an email, seized by authorities and
given to Trani prosecutor Michele Ruggiero.
The defendants are charged with aggravated market
manipulation to the detriment of a sovereign State and causing
massive economic damage.
S&P has called the charges "completely unfounded".
Complaints against S&P were initially raised by a group of
10 consumers and the Italian consumer association Adusbef, now a
civil plaintiff in the suit.
Prosecutors say at least four ratings reports were
involved and allege these were deliberately aimed at distorting
market opinion on the risks involved in buying Italian bonds as
well as the viability of Italian efforts to deal with the crisis
that hit sovereign bond markets extremely hard.
Ratings by the influential international agencies have a
significant effect on the cost of borrowing for businesses and
government, and also have an impact on the size of government
deficit and debt.
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