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Moody's downgrades Italy outlook following referendum
[WASHINGTON] The Moody's ratings agency on Wednesday downgraded its outlook for Italy's sovereign debt to negative from stable, citing the failure of the constitutional referendum, but kept the debt rating unchanged.
Italian voters on Sunday rejected a government-backed referendum seeking constitutional changes meant to help expedite economic reforms sought by Prime Minister Matteo Renzi, who resigned in the wake of the defeat.
Moody's said in a statement the result slowed progress toward economic and fiscal reforms and increased the chances Italy will put off reducing its debts, leaving it exposed to "unforeseen shocks" in an environment of sluggish economic growth.
However, the agency affirmed Italy's lower-medium grade Baa2 rating for long-term government bonds.
"Italy's growth remains subdued and its growth prospects poor, and longer-term challenges to the government's fiscal strength persist," the statement said.
"In Moody's view, the popular rejection of constitutional reform in Sunday's referendum poses a further threat to the achievement of these reforms, raising the risk of accelerating a weakening of Italy's credit profile."