NEW YORK ( TheStreet) -- Moody's Investors Service downgraded Italy's government bond ratings by three notches Tuesday, citing long-term funding concerns, a weakening global economy and "implementation risks" for the government to reduce its debt.

Moody's lowered Italy's rating to A2 with a negative outlook from Aa2, though analysts stressed in the report accompanying their downgrade that "the risk of default by Italy remains remote."

The downgrade comes as countries on the periphery of the Eurozone, including Portugal, Italy, Ireland, Greece and Spain continue to struggle over high debt burdens and fiscally healthier countries, above all Germany, are divided over how much support they will provide to prevent a default by those in the periphery.

The issue has created great stress for Europe's banks, as many of them have high levels of exposure to sovereign debt issued by countries on the periphery. Grabbing headlines lately has been Dexia, Belgium's third largest bank, which was bailed out in 2008 and may soon require additional government support .

-- Written by Dan Freed in New York.
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