Italy’s sovereign debt taken down a notch

In the latest move in the deepening European debt crisis, Italy has had its sovereign debt rating cut by the ratings agency Standard & Poor's.

Italy’s rating was cut by one notch, from A+ to A, with Standard & Poor's claiming Italy’s outlook was "negative".

The BBC reported that the agency cited fears over Italy's “ability to cut state spending and bring its finances in order”.

Standard & Poor's said slow growth will make it difficult for Italy’s government to reach its economic targets.

It also said that divisions within Italy's governing coalition could undermine its ability to implement tax rises or spending cuts.

The Italian government on Tuesday criticised the decision, saying it had been clouded by political considerations.

Meanwhile the euro fell against the dollar at the start of trading Tuesday upon the news.

The benchmark FTSE Mib index in Milan dropped 1.21 percent, with insurance giant Fondiaria-SAI and truck maker Fiat Industrial worst hit.

Italy's two biggest banks, UniCredit and Intesa Sanpaolo, also fell.