Fitch downgrades Italy, outlook negative

The rating was cut from A- to BBB+, with a negative outlook.Fitch said that the failure to come up with a clear winner makes"it unlikely that a stable new government can be formed in thenext few weeks," thereby harming prospects of furtherreforms.

“The increased political uncertainty and non-conducive backdropfor further structural reform measures constitute a further adverseshock to the real economy amidst the deep recession,” therating agency said in the statement released late on Friday.

Fitch stressed that the country’s recession was one of the deepestin Europe, adding that it expect its economy to shrink by 1.8 percent this year. The outgoing technocrat government of Mario Montiforecasted only a 0.2 contraction.

Reacting to the downgrade, the Italian Treasury said that thecurrent political uncertainty was a normal part of democracy.“We reaffirm the confidence that Italy will find the politicalsolutions and will therefore continue the ongoing reformprocess," it said in a statement.

February’s election resulted in a hung parliament, with acenter-left coalition winning the lower house but falling short ofcontrol of the Senate, which has equal legislative powers. Talks onforming a new government are not expected to begin before March20.