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Italy Credit Rating Cut by S&P as Crisis Contagion Spreads

Italy’s credit rating was cut by Standard & Poor’s, the country’s first downgrade in five years, as Greece’s worsening fiscal crisis fans concern that contagion will engulf countries such as Spain and Italy.

S&P lowered its rating last night to A from A+, with a negative outlook, saying weak economic growth, a “fragile” government and rising borrowing costs would make it difficult to reduce Europe’s second-biggest debt. The yield on Italy’s 10-year bond rose 9 basis points to 5.674 percent, 387 basis points more than similar German debt. The cost of insuring Italy against default surged to a record.