Italy to face credit rating downgrade?

23 May 2011

Italy could be set to see its credit rating downgraded after Standard & Poor's (S&P's) threat that the country's A+ debt standing may be cut.

The nation's Treasury claimed it will step up structural changes and attempt to balance the budget by 2014 following the threat from S&P.

It has seen its outlook slashed from stable to negative after concerns were aired that attempts to address the country's debt problems would be hampered due to the fragility of the government's centre-right coalition.

"In our view Italy's current growth prospects are weak and the political commitment for productivity-enhancing reforms appears to be faltering," the ratings agency explained.

Fiscal slippage could come about as a result of potential government gridlock, it added.

Last week, the credit ratings of six banks in Denmark were downgraded by Moody's Investors Service following failings at regional lender Amagerbanken, which resulted in the European Union's first senior credit losses.

By Claire Archer

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