Moody's downgraded Italy's sovereign debt rating to one to BAA3, citing concerns about rising budget deficits and public debt burdens as Brussels calls for "clarifications" on the 2019 budget.
In a statement, the agency said it had lowered Italy's rating from "BAA2" to "BAA3", meaning that Italian sovereign debt is only one degree away from falling into the speculative debt category.
But Moody's added a stable outlook, meaning it has no plans to make any new cuts over the next six months.
"The size of Italian public debt in relation to GDP will probably remain stable over the coming years at the current rate of 130 percent instead of starting to decline as Moder believes," the statement said.
The agency pointed out that the increasing concern about the public debt is the prospects for weak economic growth.
Italian Prime Minister Giuseppe Conte on Wednesday warned the European Commission that there was no way to amend his government's budget for 2019, which is in sharp contrast to European standards, prompting Brussels to ask Rome to provide "clarifications" by Monday afternoon.
The Italian parliament approved last Thursday the revised budget bill 2018 introduced by the Italian government and also included the goals of the budget of 2019.
The budget received by Brussels on Monday, a deficit of 2.4% in 2019 compared to 0.8% in the budget of the previous left government. It is expected to reduce the deficit to 2.1 percent in 2020 and 1.8 percent in 2021.
