Moody’s followed Standard & Poor’s lead and downgraded Italy’s credit rating yesterday, slashing it from Aa2 to A2 and setting its outlook to “negative,” meaning it envisions more cuts to come. Moody’s said its decision wasn’t based on Italy’s government finances, but on worries about its economic growth and, more importantly, the erosion of confidence in the euro, the Guardian reports.
Silvio Berlusconi dismissed the move as “expected,” as indeed it has been ever since S&P’s downgrade. Analysts also expect the news to lead to downgrades for Italy’s banks. “This downgrade will make it even harder for Italy to borrow,” one BBC editor said. “However that is not the worst of it.” If banks also have to spend more to borrow, he explained, it would exacerbate the eurozone banking crisis. (Read more Standard and Poor stories.)