Italy's long-term debt rating is hovering above junk status after Fitch Ratings downgraded it to BBB.
The agency pointed to the country's huge liabilities and stagnant economy which a weak government has been unable to shift.
Government debt over economic output stood at 132.6 last year, one of the highest proportions in the developed world, said the agency. The figure is 11.2% of GDP higher than the 2013 stability programme target when the rating was downgraded to BBB+.
The economy is expected to grow by a sluggish 0.9%. Bailouts worth more than €5bn (£4.2bn, $5.4bn) are being planned for three regional banks including Veneto Banca and Banca Popolare di Vicenza.
Despite that, the agency's outlook for the banking sector is stuck at negative.
Although BBB is just one notch above junk-bond status, the company said Italy's economic outlook was stable.
"The 59% 'No' vote in December's constitutional reform referendum has left a weakened interim government less able to implement new policy this side of elections," said Fitch.
"Italy's persistent track record of fiscal slippage, back-loading of consolidation, weak economic growth and resulting failure to bring down the very high level of general government debt has left it more exposed to potential adverse shocks.
"This is compounded by an increase in political risk and ongoing weakness in the banking sector which has required planned public intervention in three banks since December."
Rome has kept its 2018 fiscal deficit target of 1.2% of GDP and is expected to announce new economic measures before the autumn.