European countries with debt ratings below the top “AAA” level may see reductions in their rankings, Moody’s Investors Service said.

“All but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings,” Moody’s said in a statement. “Consequently, Moody’s expects fewer countries below “AAA” to retain high ratings.” It added that “there are no immediate pressures that could cause downgrades for “AAA”-rated countries.”

The statement came after the company yesterday cut Italy’s rating for the first time since 1993 on concern the government will struggle to reduce the region’s second-largest debt amid chronically weak growth. Italy was cut three levels to “A2” from “Aa2.” Standard & Poor’s downgraded Italy on Sept. 20 for the first time in five years.

European stocks dropped for a third day, the longest losing streak in four weeks, as policy makers signaled they may renegotiate terms of Greece’s bailout, deepening concern about the impact of the debt crisis.

The benchmark Stoxx Europe 600 Index fell 2.8 percent to 217.46 at the 4:30 p.m. close in London, the lowest level in a week.

European finance chiefs meeting this week considered “technical revisions” to the second Greek bailout, Luxembourg Prime Minister Jean-Claude Juncker said yesterday, fueling concern bondholders may have to take bigger losses on the nation’s debt.

“There has been a profound loss of confidence in certain European sovereign debt markets, and Moody’s considers that this extremely weak market sentiment will likely persist,” the ratings company said in yesterday’s statement.

“It is no longer a temporary problem that might be addressed through liquidity support, and several euro-area governments are increasingly affected by the loss of confidence.” (Bloomberg)

In the absence of a rapid return to growth and market confidence, euro-area nations “will at some point have to choose between increasing the level of mutual support and managing further defaults,” Moody’s said, adding that “the former option is the one that euro-area policy makers are more likely to adopt.” (Bloomberg)