Euro falls as Spain downgraded
Wall Street stocks slipped and the euro weakened against the dollar after Spain on Saturday lost its coveted AAA credit score from Fitch, the second ratings agency in a month to downgrade the country.world Updated: May 29, 2010 23:08 IST
Wall Street stocks slipped and the euro weakened against the dollar after Spain on Saturday lost its coveted AAA credit score from Fitch, the second ratings agency in a month to downgrade the country.
As the Spanish government battled to push through €15bn (£12.7bn) of spending cuts, Fitch cut its sovereign debt rating for the nation by a single notch from AAA to AA+.
The move, which followed a similar downgrade by Standard & Poor’s four weeks ago, fuelled fears of contagion throughout the eurozone.
Fitch’s analyst, Brian Coulton, said the challenges facing Spain in implementing austerity measures were behind the move: “Despite government debt and associated interest costs remaining within the AAA range, Fitch anticipates the economic adjustment process will be more difficult and prolonged than for other economies with AAA-rated sovereign governments.”
Economists said the development came as little surprise.
A week ago, Spain’s central bank was obliged to take control of a troubled regional savings bank, CajaSur, after a merger with a competitor fell apart.
The Spanish prime minister, José Luis Rodríguez Zapatero, won a parliamentary vote by a wafer-thin margin of a single vote on Thursday to implement sweeping budget cuts, including 5 per cent reductions to civil servants’ pay.