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Spain and Italy ratings cut by Fitch

Monday 10 October 2011 - by Andrew Hickley


The escalating eurozone crisis has seen both Italy and Spain hit with credit rating downgrades by Fitch Ratings.

Spain saw its AA+ rating lowered by two notches on Friday, down to AA-, which the agency blamed on the intensification of the euro area crisis.

The downgrade was also due to risks to Spanish fiscal consolidation, Fitch said, with some local regions overspending their budget targets. In addition, medium-term growth prospects have worsened, it said.

Italy's AA- rating meanwhile was lowered by one notch to A+ after the agency said the "significant financial and economic shock" of current market turmoil had weakened its risk profile.

The country's high level of public debt, along with its low rate of potential growth, have rendered it "especially vulnerable" to a further external shock, Fitch warned.


Both ratings were left with a negative outlook, meaning that further downgrades could be on the way if the euro area crisis continues to escalate or if budget deficit targets are missed, it added.

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