Moody's Investors Service cut Italy's bond ratings by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt.
Moody's downgraded Italy's ratings to A2 from Aa2, a lower rating than that of Estonia, and kept a negative outlook on the rating, a sign that further downgrades are possible.
However, the Italian government said the decision to downgrade bond rating was expected and insists it is "fully committed" to cutting the budget deficit.
A brief statement by Premier Silvio Berlusconi's office said the government's actions to balance the budget have been "positively received and approved by the European Commission."
The Italian parliament has approved austerity measures to cut more than €54 billion ($70 million) off of Italy's deficit over three years.
{{/usCountry}}The Italian parliament has approved austerity measures to cut more than €54 billion ($70 million) off of Italy's deficit over three years.
{{/usCountry}}(With AP and Reuters inputs)