Moody’s downgrades Italy by 2 notches - Gayo Lues

The international credit rating agency on Friday lowered Italy’s rating to Baa2 from A3, saying that Italy “is now more likely to experience a further sharp increase in its funding costs or the loss of market access” for borrowing to service its financial plan.

The move left the country two notches above junk status, and came hours before the country launched its latest attempts to raise 5.25 billion euros in a bond sale.

“The risk of a Greek exit from the euro has risen, the Spanish banking system will experience greater credit losses than anticipated, and Spain’s own funding challenges are greater than previously recognized,” Moody’s said in a statement.

Italy’s near-term economic outlook has deteriorated due to weaker growth and higher unemployment, creating the risk of failing to meet its fiscal consolidation targets.

“Failure to meet fiscal targets in turn could weaken market confidence further, raising the risk of a sudden stop in market funding,” the agency added, admitting a negative outlook for the European state’s debt.

The rating agency also voiced concerns about a diminished willingness among foreign investors to buy Italy’s bonds.

The downgrade is a fresh blow to the third-largest economy in Europe, which has been in recession since mid-2011.

Over the past decade, Italy has been the slowest growing economy in the single currency area.

Various eurozone member states, including Greece, Spain and Italy, have been struggling with deep economic woes since the bloc’s financial crisis began roughly five years ago.

SAB/MA