Standard & Poor's cut Italy's rating

Ratings firm Standard & Poor"s (S&P) cut Italy"s credit rating by one notch, from "A+" to "A", with a negative outlook, due to the deterioration of the country"s economic outlook, which threatens the country"s ability to lower its debt.

In May, S&P placed Italy on watch for a potential downgrade, warning at the time that the economic growth outlook is worsening.

"We consider that Italy"s shrinking economic activity will make the government"s revised fiscal objectives difficult to achieve. Furthermore, what we consider a tentative response to the recent market pressure suggests the perpetuation of political uncertainty when it comes to approaching Italy"s economic issues", the officials of S&P said.

Last week, the Italian government passed a 60 billion Euros austerity program, which is intended to balance the country"s budget by 2013.

The agency said that reducing the budget deficit could prove difficult or even impossible, because the government relies heavily on tax income in a country where taxes are already high.

Italian PM, Silvio Berlusconi, said that the decision of S&P to cut Italy"s credit rating does not reflect reality and appears to be negatively influenced by political considerations. The Italian officials said that his government has already prepared a plan to stimulate economic growth, says Reuters.

"The assessments by Standard & Poor's seem dictated more by newspaper stories than by reality and appear to be negatively influenced by political considerations", said Berlusconi.

(V.R.)