Moody’s cut the ratings of Italian government bonds on Thursday and said the country faced growing funding problems. The downgrade from A3 to Baa2 came hours before the launch of the latest bond sale.
The ratings agency pointed to a government borrowing requirement of 415 billion euros for the 2012/13 financial year. Analysts said Italy’s borrowing costs could move even higher as markets predict the eurozone debt crisis would spread.
The decision came just days after Prime Minister Mario Monti announced Vittorio Grilli as his new finance minister.
Moody’s warned it could cut Italy’s rating again and expects the economy to deteriorate further.
The euro fell to a two year low against the dollar on the news.