Standard & Poor's cut Italy's long- and short-term credit rating to a notch above junk status Friday, lowering its rating to BBB-/A-3 from BBB/A-2. The move reflects recurring weakness in Italy's real and nominal GDP performance, which the agency said is "undermining the sustainability of the country's public debt." The downgrade is a blow to Prime Minister Matteo Renzi, who took power earlier this year and is trying to reform the country's labor laws. S&P criticized Italy's business environment, calling it a deterrent to competition and foreign investment. "In our view, Italy has an unreformed services sector; a slow and costly judicial system; high nonwage employment costs, including high legal and administrative fees; and elevated severance costs for employees on permanent contracts," the agency said. The ratings agency maintained a stable outlook on the country's debt, which "reflects our expectation that the Italian government will gradually implement reform," it said in a statement. S&P upgraded Ireland's sovereign debt earlier Friday.
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