UPDATE 1-Italy investigates rating agencies over 2011, 2012 cuts
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ROME Feb 5 (Reuters) - The Corte dei Conti, Italy's main public audit body, has told three rating agencies that it is investigating cuts in Italy's sovereign debt ratings in 2011 and 2012, the prosecutor in charge of the case said on Wednesday.
The investigation of the cuts by Moody's, Standard & Poor's and Fitch between May 2011 and January 2012 is still at a preliminary stage and will not necessarily result in further action.
"No conclusive evaluation can be made at the moment either as to the continuation of the investigation or as to any possible summons," it said in a statement.
Before the statement was released, Raffaele De Dominicis, the prosecutor handling the case, said investigators were looking at allegations that unjustified ratings cuts may have caused damage to the Italian state amounting to more than 117 billion euros ($158.07 billion).
De Dominicis said the agencies had two months to respond to the Corte dei Conti. Prosecutors would then have a further four months to decide how to proceed.
A spokesman for S&P described the allegations as "frivolous and entirely without merit". Moody's also called the allegations "without merit". Fitch said it had always acted appropriately and in full compliance with the law.
Italy's borrowing costs shot up dangerously towards the end of 2011. Financial markets were worried about a mix of problems, ranging from political instability and economic stagnation to a possible default on its 2 trillion euros of public debt.
Markets were further unnerved by the series of downgrades by the big three ratings agencies. There was widespread criticism in Italy and elsewhere in Europe at the timing of the moves.
In 2012, prosecutors in southern Italy began proceedings against a number of employees of S&P and Fitch, alleging their reports were inaccurate and in at least one case leaked during market hours. No decision has been taken yet on whether to proceed to a full trial.
($1 = 0.7402 euros) (Reporting by Giselda Vagnoni and additional reporting by Valentina Za in Milan; Editing by Larry King)