Fitch Cuts Italian, Spanish Ratings

The credit ratings of Italy, Spain and three other euro-area countries were cut by Fitch Ratings, which said the five nations lack financing flexibility in the face of the regional debt crisis.

Italy, the euro area’s third-largest economy, was cut two levels to A- from A+.

The rating on Spain was also lowered two notches, to A from AA-.

Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained.

The downgrades, flagged a month ago by Fitch, come as Greece negotiates with creditors on how to avoid a default and other euro nations struggle to bolster the region’s defenses against contagion should those talks fail.

While sovereign-bond yields have fallen in Italy, Spain in recent weeks as the European Central Bank added liquidity, the countries downgraded yesterday still lack financial flexibility, Fitch said.

“The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability” these nations face in the event of financing shocks, Fitch said.

“These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve- currency status.”

From: Bloomberg