The rating agency Standard and Poor's (S&P) downgraded the credit worthiness of 34 Italian banks on Friday, citing heightened risk due to the country's staggering debt.

Among the banks downgraded were some of Italy's largest, including UniCredit SpA, Intesa Sanpaolo SpA and Banca Monte dei Paschi di Siena SpA. The bank downgrade comes a month after S&P slashed Italy's credit rating from A to BBB+.

"In our view, Italy's vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks' significantly diminished ability to roll over their wholesale debt," S&P said in a statement, adding that it anticipates "weak profitability for Italian banks in the next few years."

Monti unfazed

Italian Prime Minister Mario Monti dismissed the downgrade as the "mechanical effects of previous decisions."

"By and large, Italian banks have been less hit by the financial crisis than the banks in many other European countries. And have also recently, many of them, recapitalized themselves," Monti said during an interview with the American broadcaster CNBC.

Italy, the 17-member eurozone's third largest economy after Germany and France, stands at the center of Europe's sovereign debt crisis, with financial markets and policymakers worried that Rome could go bankrupt if it does not deleverage its economy and liberalize its labor market.

Prime Minister Monti implemented an austerity program after taking over from Silvio Berlusconi in November 2011. The austerity is credited with bringing Italy's 10-year borrowing rate down from an unsustainable seven to a more manageable six percent.

slk/ai (AP, AFP)