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Ratings agency Standard & Poor’s has downgraded the government debt of France, Austria, Italy and Spain by one notch, but maintained Germany’s at the coveted ‘AAA’ level.

The cuts, which eliminated France and Austria’s triple-A status, deal a heavy blow to the currency union’s ability to fight off a worsening debt crisis.

Italy was lowered to BBB+ from A. Spain slipped to A from AA-.

The downgrades come as crucial talks on cutting Greece’s massive debt pile appeared close to collapse Friday.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

PARIS (AP) _ Ratings agency Standard & Poor’s has downgraded the government debt of France, Austria, Italy and Spain by one notch, but maintained Germany’s at the coveted ‘AAA’ level.

The cuts, which eliminated France and Austria’s triple-A status, deal a heavy blow to the currency union’s ability to fight off a worsening debt crisis.

Italy was lowered to BBB+ from A. Spain slipped to A from AA-.

The downgrades come as crucial talks on cutting Greece’s massive debt pile appeared close to collapse Friday.

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Italy’s government on Tuesday approved the release of euro4.8 billion ($6.4 billion) from state coffers to fund strategic infrastructure projects aimed at stimulating economic growth.

The funds will pay for highway projects, high-speed railways and retractable underwater barriers to help protect Venice from flooding. They were released as part of Premier Mario Monti’s program to help Italy exit the sovereign debt crisis and build market confidence to save the euro currency.

Monti, an economist and former EU commissioner who took office less than three weeks ago, announced emergency measures on Sunday that seek to save euro30 billion through austerity measures, and reinvest euro10 billion of savings from those measures to enhance growth, stuck at zero for a decade.

The emergency decree allows the funds to be released immediately, but Parliament must still convert the measures to law. Approval is expected by Christmas, although major parties on the right and left want to make changes.

Monti has combined the powerful economic development and infrastructure ministries under Corrado Passera, formerly CEO of Banca IntesaSanpaolo, to ensure good coordination on projects that can boost economic growth. Many of the projects have been stalled in progress or stuck in planning due to a combination of local resistance and interruptions in state funding.

Economists have mixed views on how effective infrastructure programs are for spurring economic growth, with most favoring privately funded projects for better stimulus. Still, longer-term projects, like railways, usually require state funding because the investment period is too long for many investors.

The new funding includes euro2 billion to upgrade the Treviglio-Brescia and Milan-Genoa railway lines, both in the north, to highspeed, euro598 million for highways, and euro600 million for the Venetian lagoon mobile barriers, a project already more than two years behind schedule due to financial problems.

The projects are expected to stimulate growth through putting people to work, as well as keeping construction contracts flowing.

The gates _ called Moses, after the Old Testament figure who parted the Red Sea _ would be activated when the tide reaches 110 centimeters (43 inches), which happens on average four times a year. St. Mark’s Square floods when the tide reaches just 80 centimeters (31.5 inches) _ and most of the city’s artistic treasures are kept above 2 meters (6.6 feet) for their protection.

Other measures taken by the Monti government include raising the pension age and seniority requirements, slimming down provincial governments, reinstating a tax on first homes, raising taxes on large boats, high-performance cars and private jets and helicopters.

Monti has described the measures as a first step by his government of technocrats tasked with reforming the Italian economy, balancing its budget and spurring moribund growth. He has emphasized that he will step down at the end of his mandate, which could run into 2013, a fact that frees him from re-election pressures that have hampered long-needed reforms.

Unicredit economic analyst Chiara Corsa said the measures appear “sufficiently bold” to allow Italy to balance its budget by 2013,” even with recession looming.

“In turn this should allow Italy’s debt-to-GDP ratio to enter a downward trajectory soon,” she said.

Italy’s debt of euro1.9 trillion, or 120 percent of GDP, is considered too big to bail out if the eurozone’s third-largest economy cannot continue to turn over its debt.

Monti’s measures come on top of euro59.8 billion in adjustments made by Silvio Berlusconi’s government, before he resigned after proving unable to take even more stringent, politically costly, steps

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Italian Premier Silvio Berlusconi is expected to resign after parliament’s lower chamber passes European-demanded reforms, amid continued debate among the embattled leader’s allies over who should take his place.

While respected economist Mario Monti is clearly the top choice of Italy’s president and international markets to steer the country out of its debt crisis, members of Berlusconi’s own Peoples of Liberty Party and allied Northern League remain split low fee payday advance.

It isn’t clear if the opposition will be enough to scuttle President Giorgio Napolitano’s apparent plan to ask Monti to try to form a government once Berlusconi resigns, which is expected Saturday afternoon after the Chamber of Deputies approves economic reforms.

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Italy’s borrowing rates spiked early Tuesday to their highest level since the euro was established in 1999 ahead of a budget vote in Parliament that could force the resignation of Premier Silvio Berlusconi.

With speculation over Berlusconi’s future swirling, the markets are focused in on developments in Rome, which has become the epicenter of Europe’s debt crisis. Berlusconi’s government is under market pressure to enact quick reforms to protect Italy from the growing sovereign debt crisis, but has been hobbled by a weak coalition and political gridlock.

What happens in Italy is a particular worry as it’s the eurozone’s third-largest economy. With debts of around euro1.9 trillion ($2.6 trillion), Italy’s debts are thought to be too big for Europe to bail out.

Higher rates would make it more difficult for Italy to rollover its debts and will mean they consume more and more of national income. Italy has over euro300 billion ($412 billion) to raise in 2012 alone.

By mid-morning, the yield on Italy’s ten-year bonds was up 0.12 percentage point at 6.66 percent, down from an earlier high of 6.74 percent. A rate of over 7 percent is considered unsustainable and proved to be the trigger point that forced Greece, Ireland and Portugal into accepting the need for financial bailouts.

The vote later looks like it’s on a knife-edge, with Berlusconi’s coalition showing signs of fracture. Italian news agency ANSA reported that Finance Minister Giulio Tremonti hurriedly departed from a meeting of eurozone finance ministers in Brussels to return to Rome payday loan lenders in states.

In less tense times, the vote would have meant routine approval of the 2010 state accounts, but instead it has become a crucial test of Berlusconi’s survival as head of his 3 1/2 year-old center-right government. Last month, the vote of the same measure failed by one vote. Chamber whips were meeting a few hours before the vote to map out a strategy for the vote, which is likely to take place Tuesday afternoon.

Opposition forces were considering boycotting the vote so the numbers would more clearly show just how many deputies still support the government. If Berlusconi’s forces number less than 316 deputies _ or one more than half the number of the 630-member chamber, it would be plain that the media mogul no longer can count on a majority in the lower house of Parliament.

The government could still win the vote, by commanding more than half of those showing up to vote, but a dismal showing could show Berlusconi is too weak politically to continue to govern.

If he gets through Tuesday’s hurdle, Berlusconi has indicated he would put a vote next week on the anti-crisis measures to a confidence vote. If it loses that vote, Berlusconi would have to resign.

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Greece won’t meet 2011-2012 deficit targets imposed by international lenders as part of the country’s bailout, the Finance Ministry said Sunday.

The country’s deficit this year is expected to reach 8.5 percent of gross domestic product, or euro18.69 billion ($25.2 billion) _ higher than the targeted euro17.1 billion ($23.1 billion), which would have been 7.8 percent of GDP, the ministry said.

Greece has been reliant since May 2010 on regular payouts of loans from a euro110 billion ($150 billion) bailout from other eurozone countries and the International Monetary Fund. It was granted a second euro109 billion package in July, but details of that deal remain to be worked out.

The Finance Ministry said the missed target was because of a deeper-than-expected recession, with the economy contracting by 5.5 percent instead of the 3.8 percent estimate made in May. It implied the deficit could even exceed this level by the end of the year unless all new austerity measures were implemented.

“The final estimate for a deficit equal to 8.5 percent of GDP can be achieved, if there is a proper response by the state authorities and the citizens themselves, on whose stance the country’s financial … and social future depends,” the announcement said.

The announcement reflects the government’s frustration with tax collection, which they blame on tax inspectors’ lax performance, and its fear that citizens, angry at seeing their wages shrink and, at the same time, having to pay an increasing amount of one-off taxes, would refuse to pay.

There are already widespread calls not to pay a property surcharge, to be included in the next batch of state electricity company bills, despite the fact that delinquent payers are threatened with having their houses disconnected from the grid. The government hopes that revenue from the property levy will raise about euro2 billion ($2.7 billion) in 2011 and a similar amount in 2012.

The 2012 budget is projected to reduce the deficit to euro14.68 billion ($19.82 billion), or 6.8 percent of GDP. Excluding serving Greece’s debt, the budget is projected to have a primary surplus of euro3.2 billion, or 1.5 percent of GDP, meaning that Greece’s debt will stop growing, as a percentage of GDP.

The Cabinet also was also expected to approve a plan to cut civil service staff by about 30,000 by the end of the year. It is still in session.

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UBS Chief Executive Oswald Gruebel, under pressure after a rogue trader lost $2.3 billion of the Swiss banking giant’s money, kept silent Friday after facing the institution’s board of directors in Singapore.

Gruebel was the first of UBS’s top management and board to leave the meeting at the bank’s office and refused to answer reporters’ questions as he sat alone in the back of a chauffeured Mercedes.

Several UBS board members left about 30 minutes later and also declined to comment.

Some analysts have speculated that Gruebel’s job is at stake, though he said last weekend that he will not resign. UBS leadership may also be mulling whether to keep its investment banking arm to go along with its wealth management business.

Earlier this week, the Government of Singapore Investment Corp. _ the largest UBS shareholder _ said in a rare public rebuke that it was concerned about lapses at UBS and called on the bank to restore confidence.

The sovereign wealth fund, which owns about 6.4 percent of UBS, has suffered heavy losses on its investment as the bank’s share price has more than halved since GIC became a shareholder.

A UBS spokeswoman said Friday that no further meetings among the board and top management are planned for this weekend.

The bank’s board was scheduled to meet in Singapore this week because UBS is a major sponsor of the Formula One race being held on the island Sunday, and it plans to entertain clients at its luxury suite.

London-based UBS trader Kweku Adoboli was arrested last week and charged with fraud and false accounting for the loss. A judge ordered him Thursday to be held in jail until a hearing next month.

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Americans are depressed about their economic prospects but continue to spend their way through their latest downturn in sentiment, new consumer confidence data showed Tuesday.

The latest survey from the New York-based Conference Board, a business-research center, had its consumer confidence index plunging almost 15 points to 44.5 in August, down from 59.2 points in July. The steep drop reflected the lowest point in consumer confidence since April 2009, a month when the economy shed 539,000 jobs amid recession and financial crisis.

Blame fell on Washington’s political brinksmanship over the debt ceiling, which took the nation to the verge of a first-ever debt default.

As bad as Tuesday’s confidence number was, there was offsetting positive news in the broader report from the Conference Board, as well as in Monday’s Commerce Department report that consumer spending rose 0.8 percent in July, the best showing in five months.

“Digging deeper in the (Conference Board) report, we find that consumers’ buying attitudes do not reflect their confidence levels,” economists at Bank of America Merrill Lynch noted.

The number of consumers who indicated they would be purchasing automobiles in the next six months rose from 11.9 percent in July to 12.9 percent in August. And for the first time in nearly a year, more than 50 percent indicated that they would soon buy big appliances. Almost 47 percent of respondents planned to take vacations.

“We shouldn’t be seeing more consumers planning to take more vacations or purchase large items if they truly thought that another recession was on its way,” Bank of America Merrill Lynch’s report noted. “We think the drop in sentiment in August was a result of the dysfunction in Washington over raising the debt ceiling and also the S&P’s downgrading of the U.S.’s credit rating.”

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The Nordic region’s largest bank Nordea AB says it will lay off around 2,000 employees in 2011 and 2012, partly due to the increased costs imposed by new global bank regulations.

The bank Monday said it has started negotiations with unions in Sweden, Finland and Denmark to lay off between 500 and 650 staff in each country. It has also started negotiations with unions in Norway to reduce its work force there by between 200 and 300 people overnight pay day loans.

The bank said the “increased costs imposed by new global regulation will create challenges for all banks,” and the layoffs are part of a scheme to maintain its place among the top-league banks in Europe.

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Egypt’s government says it plans to lift the country’s hated emergency law before democratic parliamentary elections later this year.

The law, imposed in 1981, gave ousted President Hosni Mubarak’s security forces wide powers to arrest and detain Egyptians without charge. Lifting the law has been a key demand of the protesters behind Egypt’s uprising earlier this year.

Government spokesman Mohammed Hegazy told reporters Thursday that lifting the emergency law will “prepare for fair and free elections.”

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