"The negative outlook reflects ongoing economic and financial risks in Italy and within the euro area, " the agency said in the statement, warning that an uncertain market environment along with a risk of further deterioration in investor sentiment could constrain the country's use of public debt markets.
"If such risks were to materialise and also the long-term availability of external sources of liquidity support were to stay uncertain, the country's rating could transition to considerably lower rating levels. "
One of the main drivers for that downgrade was a material increase in long-term funding risks for that euro area countries with high levels of open public debt, such as Italy, the agency said.
There is also an increased risk to economic growth because of macroeconomic structural weaknesses like low productivity and marketplace rigidities, and a weakening global outlook.
"The size of the rating action is largely driven through the sustained increase in the country's susceptibility to financial shocks as a result of structural shift in market sentiment regarding euro-area nations with high debt burdens, " said the declaration.
It said, however, the risk of default through Italy remained remote, and retained its short-term score at Prime-1.
The Italian government will present new stimulus measures in a couple weeks to get the economy growing and so shield the nation from the eurozone debt crisis, Prime Minister Silvio Berlusconi stated Monday.
Source : India Times