Fitch cuts Italy's credit rating to BBB+

New York, March 8 - Fitch said Friday that it has cut Italy's credit rating from A- to BBB+, with a negative outlook. The rating agency said the downgrade was due to the "inconclusive result" of Italy's general election.

Fitch said last week that the prospect of a prolonged period of political instability in Italy after the election failed to produce a clear winner had put the nation's credit rating under pressure.

It said Friday that Italy's recession is one of the deepest in Europe and that indicators suggest it will last longer than expected, endangering the efforts the country has made to put its public accounts in order.

Fitch forecast that Italian gross domestic product (GDP) will contract 1.8% this year, while the debt-to-GDP ratio will rise to 130%. Of the three big rating agencies, Fitch was the one that gave Italy the highest rating.

Fitch warned last week that fiscal consolidation would not be sufficient to stabilise the nation's GDP-to-debt ratio if there is no growth.

Moody's also said last week that the risk of political gridlock has put the country's credit rating under threat.

Moody's gave Italy's long-term debt a rating of Baa2, two notches above junk status, in July 2012, when it said there were risks that outgoing Premier Mario Monti's reform and fiscal consolidation policies may not continue.

Another rating agency, Standard & Poor's, said the election outcome would not immediately affect Italy's sovereign rating, while stressing that it could in the future.

Pier Luigi Bersani's centre-left coalition came first in the vote but it failed to win a working majority in the Senate after ex-premier Silvio Berlusconi's centre right came a close second and former comedian Beppe Grillo's anti-establishment 5-Star Movement benefited from a big protest vote.

European Central Bank president Mario Draghi on Thursday waved away talk of market jitters after the election, saying many of Italy's fiscal reforms are set on "auto pilot".