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| Europe |
| Spain Loses AAA Rating at Fitch |
| 2010-05-29 |
| May 29 (Bloomberg) -- Spain lost its AAA credit grade at Fitch Ratings as Europe battles a debt crisis that's prompted policy makers to forge an almost $1 trillion bailout package for the region's weakest economies. The ratings company yesterday cut the grade one step to AA+ and assigned it a “stable' outlook, according to a statement from London. Spain has held the top rating at Fitch since 2003. Standard & Poor's lowered Spain's ratings to AA on April 28. “The process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium-term,' Brian Coulton, Fitch's head of Europe, Middle East and Africa sovereign ratings in London, said in the statement. Spain is struggling to cut the euro region's third-largest budget deficit as the economy, still reeling from the collapse of a debt-fueled construction boom, is forecast to contract for a second full year. Prime Minister Jose Luis Rodriguez Zapatero, who has angered traditional allies by cutting public wages and freezing pensions, has failed to convince investors he can put the finances back in order as borrowing costs continue to surge. “I would like to emphasize that it's still a high rating,' Soledad Nunez, the director of Spain's Treasury, said in a telephone interview. “The agency recognizes that public finances are strong and the government's commitment to fiscal reform.' Earlier in the day, the extra yield investors demand to hold Spanish 10-year bonds rather than German equivalents rose to 153 basis points from 152 basis points on May 27. The spread compares with an average of 23 basis points over the last decade and is just 10 basis points below the level before the EU created a financial backstop for the weakest euro members. Fitch's move follows Standard & Poor's decision to cut its rating on Spain twice since the start of 2009. Moody's Investors Service retains an Aaa rating. Spain's debt burden as a proportion of GDP was 53 percent last year, lower than Germany, France and the euro-region average. |
| Posted by:Steve White |