The ratings agency Standard & Poor's has downgraded Italy’s credit score by one place. S&P noted that the country's creditworthiness might well take a further hit in the not-too-distant future.

The New York-based agency announced on Tuesday that it was cutting the sovereign debt of Italy from BBB+ to BBB over worries that the country might not be able to absorb the effects of a worsening recession.

"The rating action reflects our view of a further worsening of Italy's economic prospects coming on top of a decade of real growth averaging -0.04 percent," S&P said in a statement.

S&P said that excessive rigidity in the Italian labor and product markets was the main reason for the country's poor economic performance. It said there was an expectation that gross domestic product (GDP) would shrink by 1.9 percent this year. A previous prediction was that GDP would shrink, but only by 1.4 percent.

There was further bad news, in that the agency gave Italy a negative outlook. That means it considered there was "at least a one-in-three chance that the rating could be lowered again in 2013 or 2014."

Big debts, little hope

The agency noted that a stagnant economy would make it more difficult for the Italian government to trim public debt, which currently stands at some 130 per cent of GDP. The figure is one of the highest among developed economies, S&P observed.

The International Monetary Fund (IMF) last week also cut its growth forecast for Italy. It said that the eurozone's third largest economy remained in a weak state and that unemployment was "unacceptably high."

By Louis Charbonneau
UNITED NATIONS (Reuters) - How deep is the divide separating Russia and the United States on Syria? A photo from the recent G8 summit in Northern Ireland says it all - two grim-faced leaders slouched in their chairs, Barack Obama biting his lip and Vladimir Putin staring at the floor.
The awkward photo opportunity, which went viral on the Internet, highlights the increasingly tense relationship between the former Cold War foes who find it difficult to agree on a series of high-profile issues, including Syria and a fugitive U.S. intelligence contractor whom Putin refuses to extradite.
Washington and Moscow have been trying since May to organize an international peace conference to bring an end to the violence. But hopes that such a conference will take place anytime soon - if at all - are fading quickly.
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov originally announced that they would try to hold the conference, which is intended to bring rebels and representatives of Syrian President Bashar al-Assad's government to the negotiating table, by the end of May.
But the date keeps slipping. First it was bumped to June, then July. Earlier this week U.N.-Arab League peace mediator Lakhdar Brahimi, who held talks with senior U.S. and Russian officials in Geneva, ruled out a peace conference before August.
Diplomats at the United Nations in New York say it is unclear whether the peace conference will take place at all.
"It's not looking too good," a senior Western diplomat said.
The point of the conference was to revive a plan adopted last year in Geneva. At that time, Washington and Moscow agreed on the need for a transitional Syrian government, but left open the question of whether Assad could participate in the process.
The United States, like the Syrian rebels, says Assad and his family should play no role in a transitional government, though Russia says there should be no conditions on the talks.
Kerry and Lavrov will discuss Syria again next week on the sidelines of an Association of Southeast Asian Nations conference in Brunei, the United Nations said on Tuesday.
ASSAD WON'T HAND OVER POWER
There are other sticking points in discussions on how to make what U.N. diplomats have been calling "Geneva 2" take place at all - who will represent Assad's government and the Syrian opposition at the negotiating table. There is still no agreement on the lineup of potential negotiators. Then there is the issue of whether Assad's other key ally Iran should participate, as Russia wants but Western governments dislike.
Recently, Assad's forces have enjoyed some military successes. They recaptured two towns near the Lebanese border, while rebels complain about insufficient arms and ammunition.
This, diplomats say, makes both Assad's government and the opposition more reluctant to seek a compromise and diplomacy in Geneva - Assad because he thinks he can win the war militarily, and the opposition because it does not want to negotiate from a position of weakness and is holding out for more weapons.
Assad's foreign minister, Walid al-Moualem, told a news conference earlier this week that authorities were ready to form a broad-based government of national unity. But he made clear that they were not planning to give up control of Syria.
"We head to Geneva not to hand over power to another side," he said. "Whoever on the other side imagines this, I advise them not to go to Geneva."
Some diplomats say the ebbing hopes for a serious peace conference highlights the impotence of the United Nations and Brahimi, who for months has threatened to quit the post like his predecessor, former U.N. Secretary-General Kofi Annan.
Annan quit the job last year out of frustration at the way the dispute between Russia, Assad's main arms supplier, and the United States, which supports the rebels and recently announced it would begin providing them with arms, has left the Security Council in a state of paralysis on the Syrian issue.
Russia and China long ago ruled out sanctioning Syria and have vetoed three Western and Gulf Arab-backed resolutions condemning Assad's government for an increasingly sectarian war that the United Nations says has killed more than 90,000.
GRIM PROSPECTS FOR DIPLOMACY
Richard Gowan of New York University predicted that a collapse of Kerry's peace conference plan will increase pressure on Obama to send more and heavier weapons to the Syrian rebels.
"If the Geneva proposal fails, there will be pressure on the U.S. to move beyond its current offer of light weapons to the rebels, especially if Assad's forces score more victories," Gowan said.
"Kerry's bet on Geneva may backfire by demonstrating that diplomacy is really a lost cause, but perhaps Kerry, who has reportedly argued for air strikes, is fine with that," he said.
Washington's cautious move to begin arming moderate Syrian rebels - not Islamist militants who are increasingly present in the conflict - came after it said Assad's forces had crossed a "red line" by using chemical weapons.
The Syrian government denies the charge and says the rebels have used chemical arms. It also accuses Western and Gulf Arab governments of arming the opposition.
U.N. Secretary-General Ban Ki-moon, now in his second and final term, is increasingly worried that he may be remembered as the man who failed in Syria, U.N. diplomats told Reuters. He has even considered stepping in himself to try to broker a peace deal if Brahimi throws in the towel, the envoys added.
Outgoing U.S. Ambassador Susan Rice, who will soon take up the post of Obama's national security adviser, said earlier this week that the council's failure to take decisive action on Syria was a "moral and strategic disgrace."
"The repeated failure of the Security Council to unify on the crucial issue of Syria I think is a stain on this body and something that I will forever regret - even though I don't believe that outcome is the product of the action of the United States," Rice said.
British Ambassador Mark Lyall Grant echoed Rice's unusually strong words, which were clearly aimed at Russia and China. He also defended the United Nations against suggestions that the organization itself was somehow responsible for the Security Council's failure to act on Syria.
"People talk about it being a stain on the United Nations but you can't blame the United Nations," he said, adding that the responsibility lies with its member states.
"We have tried very hard over the last two years to secure some leverage for the Security Council in this crisis as it's unfolded," he said. "Unfortunately we've had three resolutions vetoed by Russia and China ... Events on the ground might have unfolded very differently had those resolutions been adopted."
A March 2011 council resolution authorized military intervention in Libya and gave a green light for NATO to mount an operation to protect civilians that led to Libyan leader Muammar Gaddafi's ouster and death at the hands of rebel forces.
No Western nations have called for something similar in Syria, and Russia has vowed to prevent a similar move in Syria.
There may be no swift end to the war. And even if the opposition were to prevail, it is unlikely to bring stability.
"The Syrian civil war is likely to go on for years," said Richard Haass, president of the Council on Foreign Relations.
"It is not just that it is proving harder and taking longer to oust the Assad regime than many expected," he told Reuters. "It is also that even if the regime were to be removed, what would follow would be a prolonged round of fighting among opposition forces who disagree on just about everything except their opposition to the current regime."

(Reporting by Louis Charbonneau; Additional reporting by Dominic Evans in Beirut; Editing by Alistair Bell and Eric Beech)

Greek Prime Minister Antonis Samaras addressed his country early on Friday morning to update Greeks on the crisis that befell his coalition this week.

The government of Prime Minister Antonis Samaras lost a coalition partner on Friday after a week of late night negotiations over the future of state broadcaster ERT. Samaras is left with but a razor-thin majority in parliament, threatening his reform drive.

 

Last June, Antonis Samaras was sworn in as Greek prime minister, the head of a three-party coalition tasked with knitting together a divided society and repairing his country's broken economy. Now, exactly one year later, that coalition officially belongs to the past. On Friday, the Democratic Left said it was withdrawing its ministers from the cabinet and would only provide qualified support to the government from here on out.

The announcement was made by Democratic Left leader Fotis Kouvelis. He said he was left with little choice following the government's abrupt closure last week of the state broadcaster ERT. The departure of the Democratic Left means that Samaras will now be forced to govern with an extremely narrow majority in the 300-member parliament. His conservative New Democracy party has 125 delegates who are joined by their 28 socialist coalition partners from PASOK. The government can also count on the support of some independent deputies.
As such, the catastrophic scenario of snap elections during the crucial summer tourism season -- which had seemed almost inevitable last week -- has been avoided. In a televised statement late on Thursday night, Samaras insisted his government would serve its full four-year term. "Our aim is to conclude our effort to save the country," he said.
Pressure to avoid new elections in Greece had been high, both from within and without. Indeed, that pressure played a major role in an emergency coalition meeting on Monday night which ended with the three-party coalition still intact. Kouvelis' sudden change of heart on Friday did nothing to lessen the desire to avoid snap elections.
'No Time for Elections'
Ioannis Michelakis, a senior New Democracy parliamentarian and a close advisor to Samaras, told SPIEGEL ONLINE that the Greek people did not want a new vote and that his party, together with PASOK, was merely respecting that wish.
"The government of Mr. Samaras has saved Greece from bankruptcy and a catastrophic exit from the euro, has rebuilt the nation's credibility with its European partners and there are signs that 2014 will be the year that Greece will start recovering. This was no time for elections," he added.
In addition, the parties themselves had little to gain from a new vote, particularly PASOK. The leftist party has dominated Greek politics for much of the last two decades, but it is currently polling around 6 percent, having lost massive support due to its association with the Greek debt crisis.
A PASOK parliamentarian, who wished to remain anonymous, explained his party's decision to stay in the Samaras government by saying: "We will either thrive together (with New Democracy) if the government succeeds, or be annihilated together if we fail."
But Athens had also received clear messages from European capitals and the International Monetary Fund that any electoral adventure now could jeopardize further funding. The IMF warned on Thursday that the regularly scheduled inspection of Greece by its creditors, which was suspended earlier this week in consideration of political developments, needs to be completed by the end of July as planned if the country is to avoid any funding disruptions.
Blessing in Disguise?
Still, there are worries among the troika -- made up of the European Union, the European Central Bank and the IMF -- that the nation is entering a new phase of political instability. That, they fear, could slow the pace of reform and weaken adherence to the austerity measures which Athens agreed to as a precondition for funding.
There is, however, a possibility that the opposite might prove true. New Democracy parliamentarians told SPIEGEL ONLINE that the Democratic Left's departure could prove a blessing in disguise. They say that Samaras can now reshuffle his cabinet and appoint pro-reform ministers who will "get the job done."
The Democratic Left held two ministerial posts in the Samaras government. One, Antonis Manitakis, had been in charge of the sensitive Interior Ministry, responsible for overseeing the layoff of a total of 4,000 public servants by the end of the year. Greece's creditors have often expressed dismay at the slow pace of the implementation of the measure by Manitakis, a law professor who publicly resisted the idea of public sector layoffs.
Samaras is expected to proceed with a cabinet reshuffle immediately. His new government will include more PASOK members, perhaps even party leader Evangelos Venizelos as deputy prime minister. The two leaders were expected to meet on Friday afternoon to discuss the way forward. Samaras has been advised to then ask for a parliamentary vote of confidence in parliament, which could reinforce the stability of his government. Other advisers, SPIEGEL ONLINE has learned, have said that this is not necessary and that the parliament's vote on the bill establishing the new state broadcaster will be tantamount to a vote of confidence.
'Fundamentally an Issue of Democracy'
The Greek government fell into disarray when Samaras unilaterally decided to shut down ERT and fire its entire staff of 2,700 to prove to his domestic and foreign audiences that his reform drive remains strong. By not consulting with his partners, however, he provoked an outcry among his allies and Greek trade unions and in European capitals. A court ruling, yet to be implemented, has ordered the government to immediately resume public broadcasting. The three coalition leaders met three times over the past week to overcome the stalemate.
Last night, Samaras and Venizelos finally agreed on a plan to hire back 2,000 ERT staffers with 3-month contracts, who will operate the broadcaster until the new, slimmed-down version is in place.

But Kouvelis of the Democratic Left rejected the plan and insisted on the immediate reopening of ERT as it was. He said the reopening of the broadcaster was "fundamentally an issue of democracy." ERT reporters told SPIEGEL ONLINE that they too are planning on resisting the Samaras plan to hire some of them back on temporary contracts and insist that it reopen as it was before it was suddenly taken of the airwaves. Bootleg ERT programming continues over the Internet.
Analysts agree that the ERT issue was simply the straw that broke the camel's back and that sooner or later the Democratic Left party would have backed out of the coalition anyway. Otherwise, it risked being destroyed by the new wave of austerity measures and unpopular reforms Greece will have to swallow in the months ahead.

Source: spiegel.de