Standard & Poor's is the latest rating agency taking a negative outlook on Italy's growing deficit problem. Last week, the rating agency said that it could carry out another downgrade within the next 18 months, if the reform process does not improve after the May 2006 elections.

It follows the change in outlook Fitch Ratings took last month (see ASR 7/4/05) as the country's budget situation deteriorated further. Last July, S&P downgraded the issuer rating to AA-', citing poor budgetary figures.

But the latest market talk indicates that the Italian government is still looking to move ahead with its property backed securitization program. Talks have emerged of a third issue from Italy's SCIP program, expected to be launched in September aimed at reducing Italy's growing deficit problem, it was originally intended to be issued last year but was delayed due to problems with the SCIP 2 transaction. And a second separate real estate issue is expected for October.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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