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Fitch Cuts Italy Rating After Election Impasse

Milan skyline, Italy
Per Marco Tacca | Getty Images Entertainment | Getty Images
Milan skyline, Italy

Fitch Ratings on Friday cut Italy's sovereign credit rating by one notch to BBB plus, citing political uncertainty after the country's inconclusive election and rising debt.

Fitch added in a statement that the outlook was negative.

"The inconclusive results of the Italian parliamentary elections on February 24-25 make it unlikely that a stable new government can be formed in the next few weeks," Fitch said.

(Read More: Nouriel Roubini: Italy a 'Tsunami' Risk)

"The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amid the deep recession."

The election produced a hung parliament, with a center-left coalition winning the lower house but falling short of control of the Senate, which has equal legislative powers.

Recent data on the real economy shows the recession in Italy is one of the deepest in Europe, the ratings agency said, adding that it now sees Italian public debt peaking at close to 130 percent of gross domestic product at the end of this year.

That was a sharp upward revision from Fitch's previous forecast of 125 percent made in the middle of last year.

Italy has been in recession since the middle of 2011 and is not expected to post any growth until the second half of this year at the earliest. GDP shrank 2.4 percent last year.

(Read More: Dollar Will Soar Against Yen—Gartman)

Standard & Poor's rates Italy BBB-plus and Moody's rates the country Baa2. All those ratings carry negative outlooks.

Contact Europe: Economy

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