The timing of this ratings cut could not be worse for the eurozone
Italy has had the rating of its creditworthiness cut, the latest move in the European debt crisis.
Standard and Poor's cut its rating by one level to A from A+, and said the outlook remained negative.
The agency said weak growth may limit Rome's ability to cut state spending and bring its finances in order.
Markets shrugged off the decision, while Italian Prime Minister Silvio Berlusconi said the move was influenced by "political considerations".
Mr Berlusconi said the downgrade had been dictated more by stories in the media than by economic reality.'Catching up'
Having started marginally lower, European stock markets then rose in morning trading.
Italy's MIB index rose 0.2% in the first two hours, while the German Dax was up 1.1% and London's FTSE 100 0.7%.
"S&P were only catching up with the markets," said Jane Foley, currency strategist at Rabobank.
People I have been talking to are unanimous - the country desperately needs some strong measures. And in the opinion of Standard & Poor's, it isn't getting them.
It is going to be a rather bleak autumn and winter: cuts in social services, cuts in transport and rising prices, including a one percentage point rise in VAT last week.
There is an atmosphere of widespread dismay that the government's so-called austerity programme doesn't seem likely to bite.
Nor does it deal with two factors which colour the Italian economic situation: namely, the government's inability to deal decisively with widespread tax evasion at all levels, and the general lack of stimulus that it gives to the economy.
This is a country that has been stagnating under the leadership of Prime Minister Berlusconi for years now and doesn't show any signs of improvement.
"The markets have been penalising the Italian bond market for some months now for its fragile coalition [and] messy budget talks."
She added that fellow agency Moody's, who rates Italy three notches higher than S&P does, was now widely expected to follow suit with its own downgrade.