Exchange traded funds that invest in the European financial sector and Italian government bonds were back under the gun Monday as the debt crisis heated up after Moody’s slashed its Greek debt rating further into junk territory.

The iShares MSCI Europe Financial Sector Index Fund (NYSEArca: EUFN) was among the steepest percentage decliners on Monday with a nearly 3% loss. [ETF Spotlight: European Financial Sector]

PowerShares DB 3x Italian Treasury Bond Futures ETN (NYSEArca: ITLT) and PowerShares DB Italian Treasury Bond Futures ETN (NYSEArca: ITLY) also traded lower.

In currency markets, the euro weakened a bit against the dollar after the common currency rallied late last week on the second Greek bailout. CurrencyShares Euro Trust (NYSEArca: FXE) is among the currency ETFs that track the euro.

The euro rallied to $1.44 on the dollar after the package was announced in Brussels, reported Nick Hastings for The Wall Street Journal. Most analysts are calling the second Greek bailout a turning point for the debt crisis, however, not a resolution. [Stock ETFs Rally, Crude Touches $100 as Markets Eye EU Deal.]

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