Moody's cuts Italy's credit rating three notches

In yet another sign of the tough economic times ahead for Europe, Moody's yesterday cut Italy's credit rating by three notches and assigned it a "negative outlook."

According to analysts, while that was a significant drop, the new rating -- A2 -- was still comparatively high and according to Moody's the risk of default by Italy remained remote.

However, they say the increasing risks posed by Europe's debt crisis most probably had prompted Moody's decision.

Moody's said it was concerned that Italy would need to pay more to borrow, noting that the country would have to refinance over €200 billion in debt next year.

Moody's cited "the fragile market sentiment" in the euro area that would likely lead to "materially increased financing costs and funding risks."

In a separate statement yesterday, the ratings agency said it expected weak market conditions to persist.