Ratings agency Moody's has downgraded Italy's government bond rating from Aa2 to A2 with a negative outlook, citing risks for the financing of long-term debt and slow economic growth.
"The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," the agency said in a statement.
Moody's warned that "an uncertain market environment and a risk of further deterioration in investor sentiment" could constrain the country's access to public debt markets.
"If such risks were to materialise and the long-term availability of external sources of liquidity support were to remain uncertain, the country's rating could transition to substantially lower rating levels."
One of the main drivers for the downgrade was a material increase in long-term funding risks for the eurozone countries with high levels of public debt, such as Italy.
There was also an increased risk to economic growth due to macroeconomic structural weaknesses such as low productivity and market rigidities, and a weakening global outlook
"The size of the rating action is largely driven by the sustained increase in the country's susceptibility to financial shocks due to a structural shift in market sentiment regarding euro-area countries with high debt burdens," said Moody's.
It said, however, the risk of default by Italy remained remote, and retained its short-term rating at Prime-1.
The Italian government will present new stimulus measures in a few weeks to get the economy growing and so shield the country from the eurozone debt crisis, Prime Minister Silvio Berlusconi said on Monday.
This evening, Mr Berlusconi said Moody's decision was expected and reiterated that his government was committed to its budget goals.
"The Italian government is working with the maximum commitment to achieve its budget objectives," he said.
Mr Berlusconi added that the government's plans - including a target to balance the budget by 2013 - had been welcomed and approved by the European Commission.
