S&P cuts Italy credit rating
(Reuters) - Ratings agency Standard & Poor's cut Italy's sovereign credit rating by one notch, saying the country's economic growth prospects were getting weaker and planned reforms by the government would not help much.
S&P cut Italy's government debt rating to A/A-1 from A+/A-1+ and said the outlook for the rating was negative, meaning it could be cut further.
KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH AT GFT
"This is definitely going to put a damper on any recovery in euro/dollar...Italy is a much bigger deal than Greece. The EU and the troika have a much larger problem at hand. Investors are going to punish the fact that Italy was downgraded. They still have an 'A' rating which is much better than a lot of the other countries. From the perspective of the surprise to the market, euro/dollar has been sold off aggressively. I think we're probably going to see more weakness going into the next 24 hours. It's a much bigger deal because a lot more countries are exposed to Italian debt than they are Greek debt. The greatest concern was never really about Greece but the contagion over to Italy and to Spain...The uncertainty has really escalated and CDS prices are really going to skyrocket. I think it's going to necessitate some sort of action by the G20 this weekend.
"For the Federal Reserve they are going to look at this downgrade of Italy and I think it's going to certainly increase the chance of some greater stimulus from the central bank. If they were thinking about increasing stimulus prior to the downgrade I think they are going to probably give it much more serious thought after the downgrade."
JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO:
"I suppose it's not a surprise. The downgrade ramps up the urgency to resolve the EU imbalances. It's putting more pressure on policymakers."
MARK GERTLER, ECONOMICS PROFESSOR, NEW YORK UNIVERSITY: Continued...