AS Italians leave to take their August vacation in the mountains and on the beaches, their government is recovering from a bucket of cold water on the economy.
Despite official actions in recent weeks intended to address Italy's economic problems, Moody's Investors Service booted Italy's debt rating down two grades last week.
The influential American debt-rating service dropped Italy from AA1 to AA3, placing it below Spain and Australia and on a par with Ireland and Singapore.
"It's too bad that this evaluation comes just at the moment in which the government's action is appreciated in Italy and abroad. We were aware that it was only the beginning of a very severe course," Treasury Minister Piero Barucci said. "However, it's nothing tragic; we're more determined than ever to pick up the pace."
Prime Minister Giuliano Amato's reaction was cool.
"In this phase of my life, being prime minister, I am the one who is being examined by others. And therefore I'm not judging others," said Mr. Amato during a Friday visit to the port city of Genoa. "When I have finished this experience, I will judge the others, including those who have spoken in the last few days."
The downgrading follows that of July 1991, in which Italy slipped a position from the top rating of AAA.
Italy is the only country among the Group of Seven industrialized nations - which includes the United States, Canada, Japan, Britain, France, and Germany - not to have the top rating.
Moody's decision follows other harsh evaluations from the international community. The European Community, in an agreement at Maastricht, Netherlands, called for a reduction in Italy's sizable public debt.
Since he came to power more than a month ago, Amato has moved on a number of economic fronts - abolishing the wage-indexation system known as the scala mobile as a step toward reducing labor costs, announcing the intention to privatize several mammoth state-run companies, and increasing taxes. Government officials have repeatedly stressed that no meaningful improvement in the nation's economic standing can take place without sacrifices.
In its analysis, Moody's acknowledges as "positive" the actions taken by the Amato government and says they go beyond what was done by previous governments, but argues that they come too late.
Moody's predicts that Italy's public debt will continue to grow until the mid-1990s and says it would have been better to have acted a few years ago. Today's international economic conditions, including monetary convergence toward a single currency in Europe, will likely only aggravate the Italian debt, the report continues.
Furthermore, Moody's expresses concern about the country's political scene. The situation, it says, remains "fluid" following the April elections, which saw a diminution of support for the major political parties. The basis for agreement on dividing power among the parties has been weakened, Moody's adds. The country has been governed by coalitions since the end of World War II.
The Amato government's four-party coalition - the Christian Democrats, the Socialists, the Social Democrats, and the Liberals - holds only a 16-seat majority in the Chamber of Deputies.