Italian credit rating downgraded to BBB
ITALY had its credit rating downgraded last night as the country grapples with weaker growth prospects and the inability to reform its public sector.
Bond markets are likely to come under pressure today in reaction to the news, which came late last night. With debts in excess of €2trn, Italy owes more than any other eurozone country, so any swing in its debt prices is market moving.
Ratings agency Standard & Poors (S&P) cut Italy's credit rating by one notch to "BBB" from from "BBB+", citing the low forecasts for economic growth in the country. It is the same rating that rival agency Moodys has for the country.
S&P's new Italian rating is now just two notches above so-called "junk status", a grade that many investors are simply unable to invest in. The outlook remains "negative".
S&P cut its GDP estimate for Italy by half of one percent to -1.9pc this year, with per capital income of $25k now below levels last seen in 2007.
The poor growth profile stems "in large part from rigidities" in the labour and product markets, S&P said.
Nominal labour costs have increased more in Italy than any other areas in the eurozone, they added.