Fitch cuts Spain’s rating three notches to BBB

Fitch Ratings moved to cut Spain’s sovereign credit rating from A to BBB, a three-notch downgrade that has put the country a mere two notches above junk status. The agency further predicts a negative outlook for Spanish debt's creditworthiness.
Fitch said the Spanish downgrade reflected several realities, including the high cost of “restructuring and recapitalizing” the country's banking sector, massive government debt that is expected to peak at 95 per cent of GDP in 2015, Spain’s high level of foreign indebtedness, and the likelihood that the current recession will last well into 2013.
Fitch further cited contagion from Greece and the unlikelihood that the Spanish government had the resolve to intervene decisively to restructure the banking sector as reasons for the cut. The agency noted "the latest episode of the systemic eurozone crisis" following the inconclusive May 6 Greek general election as a factor that had darkened Spain's economic prospects.
The new rating was Spain's lowest among the "Big Three" credit rating agencies, the other two being Moody's and Standard & Poor's.
The downgrade follows a newfound pessimism on the part of Spanish Prime Minister Mariano Rajoy. On Thursday, Rajoy backed away from his position that Spain’s banking sector would not need an external bailout. He said that before speculating on how much the banking sector might need for recapitalization, the outcome of an IMF report next week and two further independent audits were needed.   (rt.com)


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