In These New Times

A new paradigm for a post-imperial world

Euro plunges as Fitch strips Spain of top-level credit rating

Posted by seumasach on May 29, 2010

As was to be expected, Anglo-america is not giving in. Here, they employ, once again, their dodgy rating agencies to downgrade Spain’s debt. It is almost beyond belief that this kind of ploy could result in anything other than laughter, let alone another run on the Euro. These are the same rating agencies which made the subprime scam possible: rather than determining the fate of nations they should be under arrest.

Irish Independent

29th May, 2010

THE euro plunged and US stock markets fell last night after Spain was stripped of its top-level credit rating by a leading rating agency over concerns about its economic growth.

In the latest blow to the eurozone, which is struggling to cope with the fallout from the Greek fiscal crisis, Fitch Ratings downgraded Spain’s sovereign credit rating — a measure of how easily it can meet the interest payment on its debt — by a notch from the top AAA rating to AA+.

Standard & Poor’s, another ratings agency, downgraded Spain’s rating for the second time to AA last month but Moody’s, the other leading agency, has maintained the rating at AAA.

Any downgrade in a sovereign credit rating will push up the interest that a country must pay on its debts.

Brian Coulton, Fitch’s head of EMEA sovereign ratings, said that the process of cutting the country’s debt could slow economic growth.

Fitch queried Spain’s forecasts for economic growth, highlighting that the inflexibility of the labour market and the restructuring of regional and local savings banks could act as a drag on growth.


Investors were unnerved by the move, sending the Dow Jones industrial average of leading US shares plummeting by 90 points, or nearly 1pc. In later trading it was down 1.3pc before before easing slightly to 1.1pc at the close .

The euro slumped against the dollar after investors abandoned it in favour of the greenback, sliding to a low of $1.2284 before rallying slightly to trade down 0.5pc at $1.2301.

It also fell against the pound, dropping to 85.04p, down from 85.40p.

Analysts said that the full effect of Fitch’s announcement, which came after the European markets shut last night, would not be felt fully until Monday morning.

John Praveen, chief investment strategist at Prudential International Investment Advisers, said: “The markets are reacting negatively. If Moody’s also downgrades Spanish debt then we will probably have a very negative reaction, as Spain is considered much bigger than Greece.”

Spain’s debt was 40pc prior to the financial crisis in 2007. Britain‘s national debt is 62.1pc of GDP. (© The Times, London)

– Grainne Gilmore

Irish Independent

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