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Berlusconi denounces Italy debt downgrade
Rating agency cites weakening economic growth prospects for downgrade, but PM says S&P is dictated by newspaper stories.
Last Modified: 20 Sep 2011 20:13

The Italian prime minister has said that Standard & Poor's (S&P) decision to downgrade its unsolicited ratings on Italy did not reflect reality and said his government was already preparing measures to spur growth.

"The assessments by Standard & Poors seem dictated more by newspaper stories than by reality and appear to be negatively influenced by political considerations," Silvio Berlusconi said in a statement on Tuesday.

He added that his government had already approved measures to balance the budget in 2013 and was preparing growth boosting measures that aimed to bear fruit in the short to medium term.

The rating agency said it had downgraded Italian debt to "A/A-1" from a "A+/A-1+" grade because of "Italy's weakening economic growth prospects".

It added that Italy's weak governing coalition would "limit the government's ability to respond decisively" to events.

"We believe the reduced pace of Italy's economic activity to date will make the government's revised fiscal targets difficult to achieve," S&P said in a statement.

Low labour participation rates, an inefficient public sector and modest foreign investment flows were cited as key drags on growth.

"In our view, the authorities remain reluctant to tackle these issues," the agency said.

S&P's rival rating agency Moody's has already indicated it is weighing its rating for Italy, which is currently at Aa2, two notches below Moody's top triple-A rating.

Source:
Agencies
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