Credit Congress '13: Z-Score Creator Bullish that Euro Situation Still Turns on Italy

In his eagerly anticipated return to Credit Congress, renowned New York University Professor Ed Altman, PhD recounted the opinion he held last year that the hero or villain in the survival of the European Union as a financial bloc was going to be Italy. That hasn't changed, though his estimations for a default by Italy have.


Altman told two crowded sessions on Wednesday that Italy was not likely to slip into default. By his estimates, a worst-case scenario has only a 30% chance of happening, which is significantly worse than the aggregate market prediction of just over 10% lower, but better than the 50% chance he estimated at last year’s Credit Congress. Developing innovation in manufacturing sectors like fashion and autos, and a wealth of brand-name products for export were Altman’s reason for lessening the likelihood of default, in addition to a wealthy private sector that should be able to overcome the country’s rigid labor system, high dept and political corruption. “If they make it, the euro will be in good shape. I still believe that,” said Altman, who invented the vaunted Z-Score bankruptcy predictive metrics system and a newer smart phone Z-Score application.


Altman noted that with Greece in a virtual lock to default and Spain getting more likely to do so, it remains that the eventual performance of Italy will be what decides if the European Union's common currency can withstand the crisis. Still, if the EU suffers more problems, Italy may just be “too big to save.”


- Brian Shappell, CBA, CICP NACM staff writer


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