S&P downgrades Italian debt rating

Standard & Poor’s has cut Italy’s long-term debt rating to BBB from BBB+ and given it a negative outlook because of fears about its economic prospects.

S&P said the move reflected its view that Italy faced weakening economic growth following a decade of real growth averaging -0.04 per cent.

“Italy’s economic output in the first quarter of 2013 was 8% lower than in the last quarter of 2007 and continues to fall,” S&P said.

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“We have, moreover, lowered our GDP growth forecast for 2013 to -1.9 per cent, from -1.4 per cent in March 2013 and 0.5 per cent in December 2011.”

S&P said figures from Eurostat showed wages had become “misaligned” with the underlying productivity of the country which was “weighing on Italy’s competitiveness”.

It added Italy’s share of the global goods and services market “declined by about one third” between 1999 and 2012.

The rating agency added while the general government fiscal position has been in surplus since 2004 it said this had been achieved from a “budgetary composition that deters growth”.

S&P said there was “at least a one-in-three chance” Italy would be downgraded again this year or next.