MILAN / ROME (Reuters) - Credit ratings agency Standard & Poors cut icts outlook for Italy to "negative" from "stable" outlook for growth Citing weak and Reduced prospects for slashing icts debt mountain.

The Downward revision Which Raise The risk of a downgrade of Italy&&9;s sovereign rating, May heighten Fears That contagion from Greece&&9;s and Other European Countries&&9; Debt Crisis Could Be Spreading To The euro zone&&9;s Third-largest economy.

"In our view Italy&&9;s current Growth prospects are weak, and The Political Commitment for Productivity-enhancing Reforms Appears To Be faltering," Said Standard & Poor&&9;s in a statement early on Saturday.

"Potential Political gridlock could" contribute "to fiscal slippage.As a result, We Believe Italy&&9;s prospects for Reducing icts General Government Debt Have Diminished. "

Standard & Poor&&9;s affirmed its &&9;A +&&9; long-term and &&9;A-1 +&&9; short-term sovereign credit ratings on Italy, Which Is Slowly Recovering from icts worst Economic downturn Since World War Two and has one of the World&&9;s Largest public debts.

In recent Years, The ratings agency has taken a Often Bleaker View of the state of Italy&&9;s economy, Compared To icts Counterparts Moody&&9;s and Fitch.

Moody&&9;s Aa2 rating Currently has year for Italy, while Fitch rats it at AA-, Which Means S & P has Italy Two notches below Moody&&9;s and Fitch one below.

Italy has weathered Better Than The Financial Crisis sacrifice part of STI&&9;s euro zone peers to icts Growth has lagged behind-the bloc&&9;s average for over a decade.

Many analysts say Unless It Reforms Needed Effect of decision to sharply icts Improve Growth Potential, it has little chance of meeting icts Medium term target to cut The Debt.

Italy Hardly Grew In The First Quarter, With gross domestic product (GDP) edging up only 0.1 percent, Compared With 1.5 percent of Rises in Germany and 1.0 percent in France. Crisis-hit Greece Grew 0.8 percent.

ITALIAN TREASURY DEFENDS ITS POLICIES

The Italian Treasury Criticized the move by S & P data are Saying icts Economic growth and public accounts Had "Constantly been better than expected."

However, Italy last month cut icts Economic Growth forecasts for 2011, 2012 and 2013 and Raised icts projections for the Public debt. It Kept Unchanged The deficit outlook.

The Economy Is Now Expected to expand by 1 high risk personal loans.1 percent this year, down from a previous forecast of 1.3 percent.In 2012, GDP Growth at 1.3 percent seen IS, Compared to 2.0 percent calculated previously.

Public debt IS Expected to Reach 120 percent of GDP this year, Slightly Before falling to 119.4 percent in 2012.

In a statement the after the S & P outlook revision, the Treasury Said Major International Organizations Such as the OECD, the International Monetary Fund and the European Commission HAD Recently given "very different" Assessments on Italy From That of S & P.

Analysts From The IMF and the OECD this month Said That Italy&&9;s economy WAS Recovering Slowly, goal Added That It Would require major structural Reform to Boost Growth Potential icts.

A weak economy Weighs Heavily On The debt and deficit ratios, and urged efforts to organisms Both Stimulate productivity growth and Labor Supply.

The Treasury Ruled Out The risk of Political gridlock, Which S & P as a factor Cited That Could Contribute to fiscal slippage Together With Weaker-than-expected Economic Growth.

It aussi Said Measures Aimed at meeting icts target of Balancing the Budget in 2014 Were "at year advanced course of preparation" and Will get Parliamentary approval "by July.

S & P&&9;s revision Is Another Blow for center-right Prime Minister Silvio Berlusconi, Who is embroiled in sex and corruption trials.

The media tycoon&&9;s People of Freedom party aussi Suffered a setback this week in local elections seen as a test of history Coalition government&&9;s popularity has facings am and is risky run-off on May 29-30 for the City Government of Milan, Italy&&9;s business capital.

The Standard & Poor&&9;s Outlook Exchange Implies a one-in-three chance thats the Credit Ratings Could Be Lowered Within 24 months.

Standard & Poor&&9;s forecast net Government Debt Has 116 percent of GDP this year, up from 100 percent in 2007.

"Under Our analysis, The Economic contraction Between 2008 and 2009 has negated all of Italy&&9;s fiscal consolidation efforts over-the-last decade," it said.

The Italian Banking Sector "has been" Strengthened by Moves to Strengthen Capital "and is in. A Stronger Financial Position Than It Was six months ago," the agency said.

(Reporting by Ian Simpson and Silvia Aloisi)

S & P cuts credit outlook for Italy to "negative"