Fitch downgrades the Province of Florence

FLORENCE, ITALY – Fitch Ratings has affirmed the Italian Province of Florence’s Long-term foreign and local currency ratings at ‘A-‘ and Short-term foreign currency rating at ‘F2’. The Outlooks for the Long-term ratings are Negative, mirroring the Outlook on Italy (‘A-‘/Negative). The rating action affects about EUR115m of debt outstanding at end-2011, as well as future borrowings.

Florence’s ratings reflect its solid budgetary performance, declining debt burden and high tax leeway which cushion its budget against additional national fiscal adjustments. Florence’s ratings are currently capped by those of the Italian Republic. Outlooks may be revised to Stable if the easing of macroeconomic conditions leads to a revision of Italy’s Outlook to Stable, provided that Florence’s operating margins remain above 8%.

With about one million inhabitants, Florence is one of the most important historical and cultural provinces in Italy. Its wealthy economy is demonstrated by a GDP per capita 25% above the EU27 average and a relatively low unemployment rate, which should remain below 7-8% in 2012-2013.