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Last week, interest rates on Italian bonds rose to distressing levels, with the rate hitting 6.01 percent on Friday. That compares with less than 1.5 percent for German and U.S. bonds. The Italian government has instituted austerity measures that have helped, Moody's said, but the negative outlook remains because there are risks that the political climate and other factors could derail them. That could lead to another downgrade. In connection with the sovereign downgrade, Moody's also lowered the highest possible credit rating for a debt issuer in Italy to A2 from Aaa, because further economic deterioration could make the country's entire financial sector more risky.
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