Fitch downgrades Italy and Spain

Italian and Spanish government debt have both been downgraded by the Fitch credit rating agency.

Fitch cut Italy’s rating by one notch, from AA- to A+, following fellow agency Moody’s downgrade last week.

It cited the “intensification” of the eurozone debt crisis that “constitutes a significant financial and economic shock which has weakened Italy’s sovereign risk profile”, the BBC reports.

Concerns were also raised about the strength of Italian banks, particularly in light of the current debt crisis.

The agency said a “vicious cycle” could emerge where a growing lack of confidence in Italian banks could knock confidence in government debt, which could in turn undermine the banks further.

Meanwhile, Spain’s rating was cut by two notches to AA-. Fitch raised concerns about the country’s ability to cut its debt levels quickly as well as its growth prospects.

It warned Spain was “especially vulnerable” to external shocks, according to the BBC.

Fitch added it expected Spanish growth to remain subdued between now and 2015, and unemployment to stay high.

However, it said the Spanish economy should grow faster than the eurozone average after this date.

 

This article was first published on Investment Week

 

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