17 June 2011 Last updated at 16:28 ET

Italy's credit rating under review by Moody's

Moody's said the weakening support for the government may affect its ability to cut debt levels

Italy's credit rating has been placed on review for possible downgrade by Moody's ratings agency.

Moody's said the country's Aa2 rating was under review due to questions over economic growth and risks in policies designed to reduce government debt.

Ongoing fears about high debt levels in the eurozone in general could also impact on Italy, it said.

Earlier, France and Germany agreed the need for a new Greek bail-out, calming fears over Europe's debt crisis.

"The Italian economy faces growth challenges in an environment characterised by long-term structural impediments to growth and potentially rising interest rates," Moody's said.

Low productivity and a rigid labour market had been a "major impediment" to growth in the past 10 years and were now hindering Italy's economic recovery, it added.

The agency also said the government may find it difficult to reduce its budget deficit, particularly given that its "electoral support is weakening".

Finally, Moody's highlighted negative investor sentiment towards eurozone government debt given the bail-outs for Greece, the Irish Republic and Portugal.