S&P downgrades Italy's government bonds

US credit rating agency Standard & Poor's has downgraded Italy's sovereign debt by one notch on concerns that the government's austerity program could weaken economic growth.

The agency said on Monday that it had cut Italy's long-term credit rating from single A plus to single A, the 6th-highest.

Standard & Poor's said prospects for growth in Italy are weakening due to the government's austerity measures and stagnant external demand.

It also said the fragility of Prime Minister Silvio Berlusconi's governing coalition is expected to limit the government's ability to respond decisively to economic and fiscal challenges.

Last week, Italy's parliament approved an additional austerity package worth about 74 billion dollars.

The latest downgrade, coupled with strong public opposition to the austerity plan, will put pressure on the government's ability to sustain its strict fiscal policy.

In a statement released on Tuesday, Berlusconi called the agency out of touch with reality and seemingly influenced by media information.

The statement said his government has come up with measures to balance the budget by 2013 and is drawing up policies for economic growth.