Italy downgrade deepens contagion fears over euro debt crisis

[marmar]

from the Guardian UK:



Italy's sovereign debt rating has been cut for the second time in as many weeks, with ratings agency Moody's citing "sustained and non-cyclical erosion of confidence" as it slashed its forecast for the country.

In a report released after US stock markets closed on Tuesday, Moody's downgraded Italy's government bond ratings from Aa2 to A2 with a "negative outlook", suggesting further cuts could be to come. The move threatens to increase Italy's cost of borrowing, and will add yet more pressure to European finance ministers now wrestling with a financial crisis that has spread across the continent.

Italy's prime minsiter Silvio Berlusconi criticised Moody's rival Standard & Poor's when it cut Italy's credit rating last month, saying the ratings agency's action was "dictated more by newspaper stories than by reality".

In its report, Moody's said the decision had been driven by three main factors: the debt crisis, which was causing a "sustained and non-cyclical erosion of confidence" in Europe and increasing "long-term funding risks" for Italy; the increased downside risks to economic growth due to macroeconomic structural weaknesses; and a weakening global outlook. ...........(more)

The complete piece is at: http://www.guardian.co.uk/business/2011/oct/04/italy-downgrade-moodys-debt-crisis

[Yo_Mama]

1. It's not really a surprise

and I don't think it will change Italy's funding costs that much. The problem is that they are already too high and each time the general economic news gets worse the outlook for growth gets worse.

It's likely that S&P will downgrade Italy again next year.