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Italian Prime Minister Silvio Berlusconi.


Silvio Berlusconi reacted swiftly and angrily to Italy's credit downgrade by Standard & Poor's, denouncing the move as divorced from reality and politically motivated.

"The assessments by Standard & Poor's appear dictated more by newspaper articles than reality and appear to be tainted by political considerations," Italy's centre-right prime minister said in a brief statement on Tuesday.

Rejecting the agency's criticism of his government as divided and unable to respond comprehensively to the crisis, Mr. Berlusconi said his coalition had always maintained its majority in parliament and had demonstrated its solidity.

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The prime minister recalled that parliament this month had passed an austerity budget with the goal of eliminating the budget deficit by 2013, and that the government was in the process of drawing up measures to promote economic growth.

Rather than assuring markets, however, Mr. Berlusconi's statement and comments by his supporters reflected the sense of a prime minister under siege, facing daily calls by the opposition to resign and make way for a broader government of national unity.

Maurizio Gasparri, a leading senator in their People of Liberty party, also lashed out at S&P, calling its decision a "political valuation", and denying that the government was paralyzed.

The senator also blamed Italy's judiciary for contributing to the negative environment, referring to the numerous court cases involving Mr. Berlusconi, who is involved in three separate trials and is the subject of other investigations.

Milan's stock market opened 1 per cent lower on the news, with shares in major banks falling. The spread between Italian 10-year bonds and their German equivalent rose sharply, approaching 400 basis points.

Giulio Tremonti, finance minister, was due to meet other ministers and business leaders on Tuesday morning to discuss structural reforms. Officials suggested that the downgrade would accelerate government efforts to initiate legislation in the form of a decree.

The marked absence of growth-promoting measures in the watered-down budget has been harshly criticized by Emma Marcegaglia, head of the Confindustria employers' lobby, and other business figures.

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