The ratings agency S&P on Friday downgraded its outlook for Italy's sovereign debt but left its credit rating untouched, upping the pressure on Rome amid a stand-off with Brussels over its budget.

The announcement, which warned Rome's fiscal policy was jeopardizing banks' ability to fund the Italian economy, followed last week's decision by Moody's to cut Italy's creditrating to notch above junk status.

"The negative outlook reflects the risk that the government's decision to further increase public borrowing – besides exacerbating Italy's already weak budgetary position – will stifle the incipient recovery of the private sector," S&P said Friday in a statement.

The decision indicates the chance the debt grade could be cut in the coming months.

The far-right League and anti-establishment Five Star Movement, ruling in coalition, have refused to change their big-spending program, which forecasts a public deficit of 2.4 percent of GDP in 2019.

The former, center-left government had pledged to keep next year's deficit to 0.8 percent of GDP in a bid to ease Italy's vast public debt, which amounts to a phenomenal 2.3 trillion euros.

The new plan went down like a lead balloon with Brussels, which on Tuesday rejected it outright, accusing Rome of "openly and consciously going against commitments made," and requested a revision.

Italian Prime Minister Giuseppe Conte said that the agency had left Italy's rating unchanged was "correct in view of our country's economic solidity."