Spain, Credit Rating | featured news

Credit ratings agency Moody's Investors Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden.

Spain's credit rating was slashed by three notches on Thursday by Fitch, which signaled it could make further cuts as the cost of restructuring the country's troubled banking system spiraled and Greece's crisis deepened.

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.

Spain's latest credit rating downgrade has thrown into sharp relief the need to revive a banking sector that could need another 100 billion euros to cover bad debts in order to avoid exposing another weak flank in the euro zone crisis.

Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain on Friday, indicating there was a 1-in-2 chance of further cuts in the next two years.

Monday's euro-zone downgrade warning by Standard & Poor's Ratings Services is a muscular move by a firm that was pilloried for its supposed laxity in the financial crisis. S&P put the long-term sovereign-debt ratings of 15 euro-zone nations, including struggling Italy and Spain, on negative watch. That typically means there is at least a 50% chance of a downgrade within 90 days, but the firm said Monday that it expected to announce any rating changes "as soon as possible" following this week's European Union summit, where policy makers are expected to lay out plans to enforce stricter budget rules.

Moody’s Investors Service downgraded Spain’s credit rating Tuesday and warned that France’s rating could also be at risk, citing both nations’ vulnerability as Europe struggles to manage its persistent debt crisis.

Fitch on Friday cut Spain's credit ratings by two notches, just a few minutes after downgrading Italy, saying the intensification of the euro zone debt crisis has had a negative impact in the entire region.

Portugal was put on notice on Tuesday that its credit rating could be cut and fellow euro zone debtor Spain had to pay more to issue new debt, suggesting the currency bloc's crisis will rage unabated in 2011.

Moody's put Spain's Aaa credit rating on review for a possible downgrade because of flagging economic prospects, challenging fiscal targets and rising funding costs.