BEIJING: Chinese rating agency Dagong said Wednesday it has cut its sovereign credit rating for Italy as the country struggles to stay solvent amid the eurozone debt crisis.
Dagong said it lowered Italy's rating from "A-" to "BBB" with a negative outlook due to the country's worsening economic conditions, growing reliance on the European Central Bank to buy its bonds and declining ability to repay debt.
The downgrade comes on the eve of a crunch summit of European leaders that many hope will see them agree on a plan -- outlines this week by Germany and France -- to save the eurozone project.
The agency, which has little sway outside China, placed Italy on negative credit watch in July, since when Rome's borrowing costs have surged above six percent, signalling strong sentiment that it could default in the near future.
Italian lawmakers begin discussions Wednesday on a severe austerity package, which Prime Minister Mario Monti has warned is needed to avoid the terrible consequences of bankruptcy.
Standard & Poor's this week placed 15 eurozone countries, including Italy, on negative credit watch -- a warning of a possible imminent cut in their sovereign credit ratings, which could increase their borrowing costs.
Despite its lack of influence, Dagong has made headlines by accusing mainstream agencies Moody's, Fitch and Standard & Poor's of causing the 2008 financial crisis by not properly disclosing risk.
Chairman Guan Jianzhong, a paid adviser to China's government, insists his agency is fully independent -- and stands by his tough talk about his rivals, whose ratings affect interest rates at which states and companies can borrow.
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