Ratings agency Standard & Poor's issued its third set of Italian downgrades Monday, affecting the credit rating of 11 Italian cities and regional governments in less than a week, and adding to concerns over Italy's already troubled economy.
S&P cut the ratings on some Italian regional and local governments from A+ to A, a move that will make it more difficult and more expensive for those governments to raise money by selling bonds. The cities and areas affected are Rome, Milan, Bologna, Genoa and Sicily.
The ratings also changed the long-term outlook for those governments to "negative," meaning further changes could come.
The downgrades come at a difficult time for Italy: last Tuesday, S&P issued its most damaging ratings change when it downgraded the Italian government's sovereign debt ratings. One day later it downgraded the ratings of 14 Italian banks, based mostly on the amount of government bonds the institutions held.
Meanwhile, Moody's, another leading ratings agency, announced it is reviewing the Italian economy, meaning another round of downgrades could soon follow.
Marcello Zanardo, an analyst with Bernstein Research, believed that the overall impact of the falling confidence caused by the expected downgrades should not be underestimated.
"All these things have an impact on the way Italy is perceived as a destination for direct and indirect investment," Zanardo said. "Overall, these things hurt."
The Italian economy continues to sputter. With low consumer confidence, rising unemployment, and a troubled government as Prime Minister Silvio Berlusconi is being distracted by personal legal issues, a quick turnaround seems unlikely.
Last week, the Italian Treasury lowered its growth forecast for this year, predicting the country's economy would grow 0.7 percent compared with 2010. This was down from the previous forecast of 1.1 percent, which was already lower than the overall growth prediction for the European Union.
Yet the Italian government has not been sitting on its hands. It recently passed a 54-billion-euro (73-billion-U.S.-dollar) austerity package, which features a mix of tax increases and spending cuts to help the country balance its budget by 2013.
However, the plan has been described by economists, academics and business leaders as not being enough to have the desired impact.
Last week, Berlusconi met with Italian President Giorgio Napolitano to help come up with new ideas to help the economy, but the talks yielded no specific results.
Giulio Tremonti, the country's finance minister and most visible economist, now appears out of the loop following a series of clashes with Berlusconi. Over the weekend, Berlusconi appeared on TV news programs and hinted that he would like to see Tremonti go. Tremonti has remained silent so far.