Surprise downgrade for Italy’s credit rating

Despite the unexpected decision to cut Italy’s debt rating, European stock markets have remained surprisingly calm this morning. Ratings agency Standard and Poor’s downgraded the country’s rating by one level, from A+ to A and stated the outlook remained negative.

The agency went on to say that weak economic growth might prevent Rome from cutting state spending and keeping its finances in check. The Telegraph, however, reported a rebound on the European markets as bargain hunters all but ignored the surprise downgrade.

According to Reuters, analysts have said the downgrade is an ominous sign for the global economy and would out even more pressure on already strained European banks.

Controversial Italian Prime Minister Silvio Berlusconi claimed the move was influenced by ‘political considerations’. Italy is the latest in a line of Eurozone countries including Spain, Ireland, Greece, Portugal and Cyprus to have its credit rating downgraded this year.

The BBC has reported the downgrade by the ratings agency will add to already existing fears of contagion in the Eurozone.

On Monday, worries over Greece and the prospect of it defaulting on its loans caused a severe wobble on the markets. The Greek government is in discussion with the IMF and the EU about securing more bailout money.