(...) Concern about debt levels and growth prospects has pushed sovereign CDS spreads wider while corporate credit spreads have continued to narrow. The trend is similar in Spain and Portugal.
While only recent, this phenomenon should spark intense debate among market participants. One camp might argue that it is difficult to justify sovereign credit spreads that are wide relative to domestic companies, as the sovereign will always exercise its right to levy taxes and fees to correct its balance sheet at the expense of the private sector. The other camp might suggest that many corporate balance sheets are pristine, and for particularly strong companies with a global footprint, the risk of default is indeed lower than the sovereign as they can only be taxed where they earn revenue and, in an extreme case, could change their domicile.I am not an expert on credit or on Italy but I would personally be surprised if this situation persisted in the long run.