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Ratings agencies downgrade 'failed to consider art'

'Huge potential for growth' says culture minister

05 February, 19:01
Ratings agencies downgrade 'failed to consider art' (By Denis Greenan).

(ANSA) - Rome, February 5 - The world's three leading ratings agencies allegedly failed to consider the huge value of Italy's artistic heritage when they downgraded its credit rating and helped push up its borrowing costs at the height of the eurozone debt crisis, the State auditor has reportedly said ahead of a possible damages suit.

The Financial Times said the Audit Court may be about to sue Standard & Poor's, Moody's and Fitch for 234 billion euros over the downgrades, which raised fears of a financial meltdown that could have led to the demise of the single currency.

However, in response to the FT's report, the Audit Court said the case was only in the "preliminary investigations stage" and could well be shelved.

"All talk of a possible amount of damages is completely premature," the Court said in a statement. The FT said S&P had revealed that it had been notified that the Audit Court may present a claim, in part because the agency allegedly failed to account for Italy's cultural assets when it cut its sovereign debt rating from A+ to A on September 20, 2011.

Standard & Poor's said at the time that the alleged fragility of the government coalition as well as chronically low growth curbed its ability to respond to the eurozone debt crisis.

Moody's and Fitch followed suit in early October, citing similar concerns.

Fitch downgraded Italy's credit rating one notch from AA- to A+ on October 7, a few days after Moody's lowered Italy's rating three levels to A2 from Aa2, with a negative outlook for the first time since May 1993.

In the reported petition, the FT quoted the Audit Court as saying: "S&P never in its ratings pointed out Italy's history, art or landscape which, as universally recognised, are the basis of its economic strength". S&P dismissed the claim as "frivolous and without merit", the FT said.

Weighing into the debate Wednesday, Italian Economy Minister Fabrizio Saccomanni repeated the argument of several Italian governments that the views of ratings agency are overrated.

Saccomanni said he could not comment directly on the report but endorsed the notion that rating agencies should not be taken too seriously.

"I don't make direct comments. But I always found that the role of ratings agencies as risk assessor for a country was excessive, and I believe that our action, both at the government and as the Bank of Italy, is to clarify that the judgement of the ratings agencies is not the only one," Saccomanni said. "I believe that today we measure the valuation that investors give Italy more on treasury bond interest rates which are falling to very low levels, and by the interest they have in our privatization and market-opening activities".

Even if the FT report turns out to be inaccurate, Culture Minister Massimo Bray said, it raised the issue of how Italy should do more to exploit its cultural heritage.

Italy is home to three-quarters of the world's artistic and archeological treasures, a priceless trove whose exact value has never been assessed.

"The value of Italy's historical, cultural, artistic and landscape patrimony cannot be called into question," Bray said.

"There is huge potential for growth that we have to valorise as best as possible.

"That is why I believe it is fundamental to put the cultural and tourist industry at the centre of the government's policies," the minister said. Italy's cultural heritage should not just be regarded as something to be conserved, Bray said, but also as "a great opportunity for social and economic development".

He said the government's recent decision to combine the governance of the cultural heritage with that of tourism was "far-sighted and winning". A report last year said Italy's culture was worth 76 billion euros each year, 5.4% of GDP, and provided jobs for 1.4 million people, 5.6% of total employment.

The survey, by the Symbola cultural institute and the association of chambers of commerce Unioncamere, said that the broader "cultural industry" adds value that reaches 15% of the total national economy and employs 4.5 million persons - 18.1% of Italy's total employment.

Yet cultural programmes are often the first to fall prey to austerity drives, the report said.

The study, the first to quantify the importance of culture in the national economy, "refutes those who describe it as a non-strategic sector," said Symbola and Unioncamere.

"(This report) instead frames it as a factor in recovery for much of the Italian economy, one of the levers to give oxygen to a country sorely tested by the ongoing crisis".

Symbola President Ermete Realacci, a well-known heritage and environmental advocate, said "Italy has to do what Italy is good at" to lift the country out of recession. "Culture and its intangible infrastructure are part of this vital challenge".

After a series of arts cuts and with many of its iconic monuments - including the Colosseum and Pompeii - in urgent need of repair, Italy has been trying to get private investors to help it preserve its heritage.

The highest-profile initiative so far is billionaire Diego Della Valle's 25-million-euro ($33-million) project to restore the Colosseum.

But the plan has bogged down amid red tape, union protests and suits from associations who claim Della Valle is getting undue publicity.

Bits of the 2,000-year-old Roman amphitheatre have come off in recent years and the scheme's projected start date of March will be hard to meet.

At Pompeii, which has also seen a string of collapses in recent years, a long-discussed prospect of luring private investors is an even more distant prospect.

The government has promised to unblock 105 million euros ($138 million) in European Union funding for a four-year maintenance plan and raise the number of archaeologists at the site from just one.

Pompeii was closed Wednesday in the latest of a series of union protests that forced hundreds of baffled tourists to abandon their day trip to the ancient Roma city.

In a recent appeal, the National Association of Italian Archaeologists said "Italy's entire heritage needs attention".