Moody's Investor Services commented that the uncertainty provoked by the inconclusive elections in Italy are credit negative for the sovereign rating and could cause contagion to other peripheral Eurozone countries such as Portugal and Spain.

"Instead of increasing visibility on the country's political direction, Italy's recent elections raised the risk that the structural reform momentum achieved under the government of Mario Monti will stall, if not come to a complete standstill," Moody's said in a report published yesterday.

Despite the concern over the hung Italian parliament, Moody's took no action on the current 'Baa2' rating and the outlook continues to be negative, although it is not on credit watch at this point. This level is two notches above junk bond status.

The credit rating agency did warn however of the danger of spillover to other Eurozone members "potentially reigniting the euro area debt crisis".

JM

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