The rating on the Italian City of Milan continues to reflect Milan's good liquidity, above-average revenue flexibility by national and international standards, and relatively good operating balance. The rating is also supported by Milan's wealth indicators, which stand well above the European average, and by its largely service-driven diversified economic base. On the negative side, the rating takes into account the city's heavy debt burden. The rating and outlook on Milan will continue to be constrained by those on the Republic of Italy (A+/Stable/A-1+) as long as the framework for intergovernmental relationships between the central government and local and regional governments (LRGs) restricts the latters' managerial and financial autonomy. Milan's operating margin is good by national standards (4% of operating
