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Moody's slip up concerns Italian banking sector

The head of Moody's credit-rating agency in Italy has been forced to apologise to the markets after suggesting that the Greek debt issued could soon spread to other European countries and impact upon the Italian banking system. The comment was made at a meeting to release a report on the risk to banking systems in Portugal, Spain, Italy, Ireland and Britain which is only hypothetical at the moment.

The ill-conceived comments caused mayhem in the financial markets and indeed a number of Italian banks were immediately marked down. While the comment could well have justification in the future, the reaction of investors says everything about the fragile confidence within European and worldwide financial markets. The apology, although heartfelt, has had little impact with many believing that the damage has already been done and the nightmare scenario has been partially painted by the head of Moody's Italian division.

While talk of problems within the European and worldwide banking system have been evident for some days now, to see such a prominent figure and a prominent company publicly discussing these issues has spooked many investors. In all honesty the comments attributed to the Moody's credit rating agency are no different to those swirling around the heads of many analysts and experts at the moment.

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