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Italy credit rating drops after inconclusive election

Fitch downgrades Italy’s credit rating to BBB+ from A- and warns further drop possible.

Italy credit rating mario montiEnlarge
Italian Prime Minister Mario Monti pauses during a news conference with German Chancellor Angela Merkel on August 29, 2012 in Berlin, Germany. (Adam Berry/AFP/Getty Images)

After an inconclusive election, Fitch has downgraded Italy’s credit rating to BBB+ from A- and warned a further drop could be forthcoming.

Italians went to the polls on Feb. 24-25, but didn’t elect a majority government. Premier Mario Monti is leading a “caretaker government.”

Fitch said it made the move because it’s “unlikely that a stable new government can be formed in the next few weeks.”

“The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession,” a news release from Fitch said.

Further, Italy’s economy is expected to contract 1.8 percent this year while its debt-to-economy ratio will climb to 130 percent.

Talks about forming a new government in Italy are to begin within the next two weeks, The Associated Press said.

In response to the downgrade, Italy’s Finance Ministry said the country is undertaking “part of the normal democratic process.”

Italy’s lawmakers are divided equally among the senate and lower house, Reuters reported.

A center-left coalition controls the lower house, but not the senate.

“We reaffirm the confidence that Italy will find the political solutions and will therefore continue the ongoing reform process,” the statement from Italy’s Finance Ministry said, according to Reuters.

More from GlobalPost: Italian president considering technocrat government, sources say 

http://www.globalpost.com/dispatch/news/regions/europe/italy/130308/italy-credit-rating-drops-after-inconclusive-election