LONDON: Italy's credit rating would not be at risk of a downgrade if the government bailed out its ailing banks, Standard and Poor's head of sovereign ratings said in an interview.
A referendum on constitutional reform due later this year, which will determine the political future of Prime Minister Matteo Renzi, is unlikely to have much impact either, Moritz Kraemer said.
Estimates of the cost of shoring up Monte dei Paschi and other strained banks in Italy vary but Kraemer, told Reuters the total would be manageable for the already highly indebted country.
"In terms of Italy's sovereign rating, a bailout of the banks is incremental. The central government has a two trillion debt load already and this is not going to sink the boat," he said. "I don't think this would be big enough to make a difference (to the rating)."
Italy's banks are collectively burdened with some 200 billion euros in non-performing loans.
Rome tried unsuccessfully last month to secure an exemption for Monte dei Paschi from new euro zone rules that require bond holders to be tapped before taxpayers in any bank rescue.
The world's oldest bank has arranged a provisional privately-funded rescue but analysts are uncertain about the impact and Bank of Italy governor Ignazio Visco as well the European Central Bank's chief economist have said government support should not be ruled out.
S&P has the lowest rating on Italy of the three main agencies, just one notch above junk at BBB- but with a stable outlook.
Moody's rates Italy Baa2 while Fitch rates it BBB+. Canada's DBRS, a smaller firm whose ratings are recognised by the ECB, put the country's last 'A' rating on review last week, citing pressure on Italian banks and political uncertainty surrounding a forthcoming constitutional referendum.
If it were to downgrade the country, its banks -- which use Italian government bonds as collateral to raise cash from the ECB -- would face higher funding charges.
S&P's Kraemer said investors should not get "overexcited" about the October referendum.
It was not as important an event as Britain's vote on June 23 to leave the European Union, an outcome which prompted S&P to slash two notches from the UK's AAA rating.
"(Italians) are not deciding to rip up everything. In the worst case they are just carrying on with what we have.
It is not irreversible either," said Kraemer, adding that S&P's rating for Italy had "room for disappointment".
"On the UK we were crystal-clear, if there was a vote for Brexit then the rating would go down. If we knew with any certainty that we would go to a negative outlook on Italy, we would have published that information."
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