The move came shortly after Fitch, a key global institution gauging the financial solidity of sovereign borrowers, downgraded the rating for France.

The agency raised the rating of Italy – the eurozone’s third-largest economy – to “BBB+” from “BBB” with a stable outlook.

“The upgrade reflects increased confidence in Italy’s fiscal trajectory,” Fitch said.

This is “underpinned by a growing record of fiscal prudence” and commitment to meeting targets under the new EU fiscal framework, it added.

Fitch also mentioned other factors including “a stable political environment” and “ongoing reform momentum” in its assessment.

Fellow eurozone countries Spain and Portugal have separately seen recent upgrades by ratings agencies as well.

Debt-laden Italy posted GDP growth of 0.7% in 2024 – falling short of government expectations – and also in 2023.

Its public deficit has been cut by more than half, falling to 3.4% of GDP last year from 7.2% in 2023.

Fitch downgraded France last week to “A+” from “AA-” as it warned that France’s soaring debt would continue to rise until 2027 without urgent action.

France now borrows at almost the same cost as Italy, a first since the euro was introduced in 2002.

The rating agency’s downgrade for France – which occurred after former prime minister Francois Bayrou lost a parliamentary confidence vote – cited political instability that threatened the country’s public finances.

In upgrading Portugal’s credit rating last week, Fitch cited its sizeable debt reduction and “strong record of prudent fiscal policy.”

Nonetheless, Italy carries a much higher debt load than France, at 135% of gross domestic product last year, versus 113% for its neighbour.

Italy’s medium-term outlook is also bleak, with the country suffering from low productivity and an aging population.