Italy gets more downgrades

Seven of Italy's banks have been dropped by one notch and six others have been downgraded by two notches, Moody's Investor Service said on Monday.

Two of the country's largest banks, Intesa SanPaolo and Unicredit, went from an A3 credit rating to a Baa2 with a negative outlook. Major utilities companies, including the country's largest postal service Posta Italiane, energy giant Eni and energy and water services provider Acea, as well as a number of local government authorities also saw their ratings cut by Moody's on Monday

The move comes just three days after Italy's sovereign debt rating was reduced to Baa2 - just two notches above junk status over fears that a possible Greek euro exit and a Spanish banking collapse could drive Italy further into crisis.

"Along with the increase in the risk of sovereign bond defaults, the downgrade of Italy's long-term ratings to Baa2 also indicates a similarly increased risk that the government might be unable to provide financial support to its banks in financial distress," the ratings agency said in a statement.

Due to their vast holdings in Italian government bonds and due to the spreading debt crisis, Italian banks have come under increased pressure.

Italian Prime Minister Mario Monti said last week he did not rule out tapping eurozone bailout funds through a new bond-buying system to help ease the country's borrowing costs - a move, according to Moody's, that could trigger a further downgrade.

sb/slk (Reuters, AP, dpa)