Standard & Poor’s yesterday downgraded Italy’s sovereign debt rating, citing economic, fiscal and political weaknesses in a fresh blow to Silvio Berlusconi’s fragile coalition government.

The rating agency said it had downgraded Italian debt to “A/A-1″ from a “A+/A-1+” grade because of “Italy’s weakening economic growth prospects.”

It added that Italy’s weak governing coalition would “limit the government’s ability to respond decisively” to events.

“We believe the reduced pace of Italy’s economic activity to date will make the government’s revised fiscal targets difficult to achieve,” S&P said in a statement.

It was more bad news for Italian Prime Minister Berlusconi who is under fire over the economy, in the courts and, increasingly, from the voters; his popularity plunged to 24 percent in a September poll.

He appeared in a Milan court yesterday for a hearing into claims he paid a lawyer 416,000 euros (US$600,000) for false testimony about his business dealings.

He is also on trial for allegedly buying sex from a girl known as “Ruby the Heart Stealer” when she was a minor.

Standard & Poor’s in its analysis offered no succour to the beleaguered prime minister.

Low labor participation rates, an inefficient public sector and modest foreign investment flows were cited as key drags on growth.

“In our view, the authorities remain reluctant to tackle these issues,” the agency said. 

Source:Shanghai Daily