September 19, 2011
Sept 20 (Reuters) – Standard and Poor’s downgraded its unsolicited ratings on Italy by one notch to A/A-1 and kept its outlook on negative, a major surprise that threatens to add to concerns of contagion in the debt-stressed euro zone.
The single currency skidded over half a cent to $1.3606 after S&P said the cut reflected its view of Italy’s weakening economic growth prospects.
Italy’s fragile governing coalition and policy differences within parliament will likely limit the government’s ability to respond decisively to the challenging domestic and external macroeconomic environment, the agency 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,” said S&P.