Standard and Poor’s has cut its unsolicited ratings on Italy by one notch to A/A-1 and kept its outlook on negative, Economic Times reported.This comes as a major surprise threatening to add concerns of contagion in the debt-stressed euro zone, the reports said.
The single currency skidded over half a cent to $1.3606 after S&P said the cut reflected its view on Italy’s economic growth prospects.
Italy’s fragile governing coalition and policy differences within parliament may limit the government’s ability to respond decisively to the challenging domestic and external macroeconomic environment, the agency said.
Financial services company S&P said, “In our opinion, the measures included in and the implementation timeline of Italy’s National Reform Plan will likely do little to boost Italy’s economic performance, particularly against the backdrop of tightening financial conditions and the government’s fiscal austerity program.”
The move from S&P came as a surprise as the market had thought Moody’s was more likely to downgrade Italy first. Last week, Moody’s said it would take another month to decide on its action.
The downgrade came as Greece struggles to meet the demands from lenders for yet more rigor measures. “It’s just more of the same negative news,” said Stephen Roberts, a senior economist at Nomura in Sydney. “It only adds to the contagion risk over Greece and has encouraged the flight to safety in markets here,” he added.
Standard & Poor’s is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. The company is also one of the Big Three credit-rating agencies, which also includes Moody’s Investor Service and Fitch Ratings.
