Spain had its credit rating cut two levels by Fitch Ratings, which cited the “intensification” of the euro crisis, slower Spanish growth and regional finances as risks to the nation’s debt outlook.
Fitch cut its rating to AA- from AA+, the company said in a statement on Friday from London. The outlook is negative. Fitch cited similar reasons for also downgrading Italy one level to A+, while maintaining Portugal at BBB-, saying it would complete a review of that ranking in the fourth quarter.
Spain’s rating, which was AAA until 2010, has now been lowered twice by Fitch as the deepest austerity measures in three decades fail to convince investors the nation can stem the surge in its debt burden. Moody’s Investors Service also warned on Tuesday “all but the strongest euro area sovereigns” are likely to see further downgrades, as it cut Italy’s rating for the first time in almost two decades.
Fitch said it expects Spanish growth to remain below two per cent a year through 2015. Still, the nation’s debt burden will peak at 72 per cent of gross domestic product in 2013, below the forecast for the euro area on average, the company said.
Spain is paying yields of around five per cent on its 10-year bonds even after the European Central Bank stepped in to prop up its bond market on August 8. The gap between Spanish and German 10-year borrowing costs was 299 basis points on Friday.