(Image Source: Street Insider)

BY RUISHA QIAN

Another negative outlook for Spain and Italy.

The BBC reports...

“Fitch cut Italy's rating by one notch, from AA- to A+, following fellow agency Moody's downgrade earlier this week. … The agency also cut Spain's rating by two notches, to AA-.”

According to the BusinessWeek, Fitch said the downgrade reflects...

“The intensification of the euro zone crisis which constitutes a significant financial and economic shock.”

The downgrade doesn’t come as a surprise. Bloomberg’s Mark Crumpton says, in fact, it highlights what many observers already knew.

“Italy and Spain, and Italy in particular, are much larger sovereign debt issuers than Greece or Iceland. Italy is the third largest sovereign debt issuer in the world after the U.S. and japan. Weaker credit conditions in Italy in particular are fairly troubling for the banking system in Europe and in the U.S..”

The Wall Street Journal says the downgrade isn’t having a huge impact on the market. But Spain on the other hand -- well, that’s another story.

“With large fiscal and external financing needs, heightened volatility has adversely impacted market financing conditions for Spain... The budgetary performance of some regional governments ... poses a risk to fiscal consolidation.”

It appears that both Italy and Spain are dismissive of the downgrades.

The Daily Mail quotes a spokesman at Spain's economy ministry as saying, “We respect the decision but we don't agree with it.”
“Italian Foreign Minister Franco Frattini was more dismissive, saying the move was fully expected and adding that “markets don't care much about the role of Fitch, Moody's and company.”


Despite this, the undeniable fact is, the ratings could intensify Europe’s crisis. Market Watch reports after the downgrades...

“The euro turned down to $1.3401, after topping $1.35 and … the downgrades made equities reverse. The Dow Jones Industrial Average lately fell 0.5%.”


 

Business News: Spain, Italy Ratings Down

Spain, Italy Ratings Down: Not a Surprise

October 8, 2011
(2:01)
Fitch cut down the credit ratings of Spain and Italy.
   
TRANSCRIPT

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