Standard & Poor's Ratings Services on Monday slashed Italy's sovereign-debt rating by one notch and kept its outlook on negative, citing the euro-zone's third biggest economy's weak economic growth and fragile government coalition.

S&P now rates Italy's long-term debt at A and short-term debt at A-1, its outlook is still negative.

The ratings agency said in a release that Italy's fragile governing coalition and policy differences in parliament will likely continue to limit the government's ability to respond to the challenging domestic and external macroeconomic environment.

"In our opinion, 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 said.

The downgrade would add to concerns of contagion in the debt- stressed euro zone, according to analysis.

Investors have expected Moody's Investors Service become the first ratings firm to cut Italy's ratings. Moody's on Friday maintained its negative review on Italy's sovereign debt rating, saying it will likely need another month to evaluate the country's credit-worthiness.

Moody's rates Italy at Aa2, higher than S&P.