'Weakening' Italy's Debt Rating Downgraded

SKY:  Italian Prime Minister Silvio Berlusconi has rounded on credit ratings agency Standard and Poor's after its shock downgrade of his country's debt. 

The agency cited economic, fiscal and political weaknesses for its decision to drop the rating to A/A-1 from a A+/A-1+ grade.

Standard and Poor's (S&P) said the downgrade was made because of "Italy's weakening economic growth prospects" and a view that the country's governing coalition would "limit the government's ability to respond decisively" to events.

It added the outlook for the country was negative.

"We believe the reduced pace of Italy's economic activity to date will make the government's revised fiscal targets difficult to achieve," S&P said in a statement.

In response, Mr Berlusconi said: "The assessments by S&P seem dictated more by
newspaper stories than by reality and appear to be negatively influenced by political considerations."

He insisted that measures to boost economic growth in the short and medium term were on the way following spending cuts already announced to help balance Italy's budget in 2013.

Italy has the second-largest debt level in Europe and, as lenders have become increasingly nervous about its ability to repay loans, the cost of that debt has been increasing.

News of the downgrade overnight helped tip the Japanese stock market to a 1.6% fall while in Europe, major equity markets also opened lower.

Italy joins fellow eurozone countries Spain, Ireland, Greece, Portugal and Cyprus, which have all been downgraded this year.

S&P also cut the credit rating of the US from AAA to AA+ for the first time in its history.

But one expert told Sky News there was one bright spot for the debt-laden Italians compared to their major competitors.

David Bloom, the head of foreign exchange strategy at HSBC said: "They don't borrow for current expenditure, they just borrow for the horrors of the past.

"So actually what we are hoping is that one day the US/UK could get into that good position that Italy's in and that's the irony.