Italy will bring forward to next month plans for slicing 35 to 40 billion euros off its budget deficit, government sources said on Monday, moving to reassure markets after a rating agency cut its outlook on the country.

The measures, to be announced by decree, aim to balance the budget in 2014.

One source told Reuters the center-right government was bringing forward the decree to give a signal to the markets after Standard & Poor's cut its rating outlook to negative from stable on Saturday.

The government will issue a decree in June, a second source said on condition of anonymity.

The decree, designed to cut the deficit in 2013 and 2014, will come into force immediately, but needs parliamentary approval within 60 days.

(A decree before the summer) could contribute to reassuring the markets on Italy's public accounts, said one of the sources.

According to the EU stability pact, Italy could have waited until September to announce the measures.

But the Italian Treasury decided to bring them forward after S&P's unexpected outlook cut, which the ratings agency said was due to weak growth and increased risks to Italy's debt reduction plan.

The cost of insuring Italian government debt against default rose on Monday, with five-year credit default swaps (CDS) rising 15 basis points to 176 bps, according to data monitor Markit.

(reporting by Giuseppe Fonte; Editing by John Stonestreet)