Italy's credit rating has been slashed by ratings agency Moody's, piling more pressure on the beleaguered eurozone.
Italy’s credit rating has been slashed by ratings agency Moody’s, piling more pressure on the beleaguered eurozone.
Moody’s said last night that Italy’s rating had been cut three notches from Aa2 to A2, with a negative outlook assigned, suggesting more cuts could be on the way.
The ratings agency blamed a “material increase in long-term funding risks for the euro area”, due to lost confidence in eurozone government debts.
Despite Rome’s low current borrowing needs, and low private-sector debt levels in Italy, Moody’s said market sentiment had turned against the euro.
The move will heap more woe on the region as it faces its most challenging period since its creation. Ministers across the eurozone are now understood to be thrashing out plans to aid the banking sector across the region amid fears over banks’ exposure to a variety of government bonds.
Fellow ratings agency Standard & Poor’s has already cut its rating on Italy to a single A.
According to the BBC, Italian prime minister Silvio Berlusconi said the decision was expected.
“The Italian government is working with the maximum commitment to achieve its budget objectives,” said Mr Berlusconi.
He said that a plan to balance the government’s budget by 2013 had been approved by the European Commission.
This article was first published on Investment Week.