Moody's downgrades Italy by 2 notches

Ratings agency Moody's on Friday downgraded Italy's government bond rating from A3 to Baa2, the US-based agency warned out of its Frankfurt office. It was keeping the outlook negative, dpa quoted Moody as saying. Rome's short-term rating, applied to debts on a shorter timescale than government bonds, was unchanged at Prime-2, it said. Since the last rating five months ago, the risk had increased of "a further sharp increase in its funding costs or the loss of market access" for Italy, the agency said. This was due to "increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base." Weakening growth and rising unemployment were increasing the risk that the country would miss its fiscal consolidation targets, Moody's said.