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.

Greek Debt Wrangle May Pull Default Trigger

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt write downs will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclay’s Capital estimates.

Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.

European Stocks Decline on Greek Debt Impasse

European (SXXP) stocks declined from a five-month high as the region’s finance ministers failed to agree on a debt-swap deal for Greece and called for a greater contribution from bondholders. U.S. index futures retreated and Asian stocks fluctuated.

Banks tumbled, leading losses on the benchmark Stoxx Europe 600 Index.

Society Generale SA and Credit Agricole SA (ACA) retreated at least 3.5 percent after Standard & Poor’s cut the banks’ credit ratings.

Siemens AG (SIE), Europe’s largest engineering company, dropped 3.3 percent after saying that achieving its goals for the year has become harder.