LONDON, England - September 20, 2011 - Global financial markets are bracing themselves for another day of turmoil on Tuesday after credit ratings agency Standard & Poor's downgraded Italy late Monday night.

The news came after panic gripped global markets as a fresh showdown over Greece renewed fears that the eurozone will be plunged into crisis.

The rating for Italy, which has Europe’s second-largest debt load, was lowered from A+ to A, S&P said in a statement. The agency said the country's net general government debt is the highest among A-rated sovereigns, and now expects it to peak later and at a higher level than it previously anticipated.

“In our view, Italy’s economic growth prospects are weakening and we expect Italy’s fragile governing coalition and policy differences within Parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P said in a statement. "The measures included in and the implementation timeline of Italy's National Reform Plan will likely do little to boost Italy's economic performance, particularly against the backdrop of tightening financial conditions and the government's fiscal austerity program."

S&P also said it lowered its outlook for Italy’s annual average growth to 0.7% for 2011 to 2014, from a prior projection of 1.3%.

The Italy downgrade wiped around 70 points off the 24-hour Dow. The euro/dollar slumped more than half a cent to 1.36. The FTSE 100 is now expected to open flat on Tuesday.