Standard and Poor's cut its unsolicited ratings on Italy by one notch, warning of a deteriorating growth outlook and damaging political uncertainty, in a move that took markets by surprise and added to pressure on the debt-stressed euro zone.
The agency, which put Italy on review for downgrade in May, said that the outlook for growth was worsening and there was little sign that Prime Minister Silvio Berlusconi's fractious centre-right government could respond effectively.
On Monday, Italian sources said the government was preparing to cut its growth forecast to 0.7 percent in 2011 from a previous forecast of 1.1 percent and cut its 2012 forecast to "1 percent or below".
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