More drama has descended on the Republic of Italy's mounting fiscal problems. After the country revised GDP forecasts that breached the fiscal deficit cap imposed by the European Commission, Italy now faces the repercussions from a downward ratings action. Fitch Ratings last week changed its outlook on Italy to negative from stable.

Fitch affirmed the long-term rating at AA' and short-term at F1+ but said last week in a teleconference that the deteriorating scenario could possibly lead to a downgrade unless the country is able to turn around its negative growth prospects and public finances. Standard & Poor's lowered the country's ratings last July to AA-' stable from AA'.

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