Fitch downgrades five eurozone economies

US ratings agency Fitch has said it is downgrading the credit ratings of five countries that use the euro, including economic heavyweights Italy and Spain.

Fitch rating agency has downgraded the
debt ratings of five eurozone states including Spain and Italy,
pointing to the growing vulnerability of their economies.

Fitch said the downgraded countries - also including Belgium, Cyprus and Slovenia - faced financial and economic headwinds from the eurozone's debt crisis that could diminish their ability to sustain their own debt loads.

The downgrade was largely expected as Fitch had said it was reviewing the country's ratings. It comes on top of a downgrade of nine eurozone countries by another ratings agency, Standard & Poor's, on January 13.

The downgrade was another setback to European leaders' efforts to contain a crisis over too much government debt in some euro member countries. Ireland, Greece and Portugal have been cut off from bond market borrowing by fears that they might default and have had to take bailout loans from other eurozone governments and the International Monetary Fund.

Fitch cited the European Union's (EU) slow-moving approach to fundamental reform of how the euro currency is set up, as well as the lack in the interim of a credible financial firewall with enough money to keep countries that suddenly have trouble borrowing from defaulting.

The agency lowered ratings for the five by one notch and placed a negative outlook on all of them. Italy went down to A- credit rating while Spain was downgraded to A. Additionally, a sixth country, Ireland, saw its BBB+ rating affirmed but it also received a negative outlook.

Italian Prime Minister Mario Monti has implemented
a number of measures to strengthen Italy's finances

Fitch Ratings blamed the revisions on "the marked deterioration in the economic outlook" in Europe and "the absence of a credible financial firewall against contagion and self-fulfilling liquidity crises".

It said that European leaders' "gradualist" approach to tackling the crisis meant that Europe will continue to face episodes of severe financial volatility that would erode governments' ability to repay debt.

It said those fears would be compounded by a shrinking economy, now that many economists expect at least a mild recession.

"The eurozone crisis will only be resolved as and when there is broad economic recovery," Fitch said. "It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration."

Copyright © 2012 The Press Association. All rights reserved.

France, Austria and Italy - Downgraded In Credit Ratings Blitz

France, Austria and Italy have all had their credit ratings downgraded by ratings agency Standard & Poor's.
France and Austria now both hold AA+ ratings, while Italy, which formerly held a BBB+ rating, now finds itself on BBB.


More countries are expected to be downgraded in the next few hours.

Francios Barion-"half-surprised"

Speaking on France 2 television, Francois Baroin said his country's notification was a "half-surprise".
"It is not good news," he said, but insisted the country was taking the right direction.
"The markets had perhaps anticipated the move, which is why their reaction was moderated this afternoon."


The euro fell to a 17-month low on the currency markets amid early reports of the news - the latest in the eurozone crisis - and stock markets across the world also declined.


It is understood the agency will confirm the announcement after markets close in the US.

French President will hold crisis meetings.

French president Nicolas Sarkozy held crisis talks with key ministers after news of the downgrade emerged.


Other countries within the single market are also at risk of a downgrade by the prominent ratings agency, among them Slovakia.


Reuters columnist Peter Thal Larsen told Sky News: "If we are talking about expectations then clearly France is what we would consider to be most vulnerable to a potential downgrade."


A French downgrade would be significant due to the country's role as one of the AAA guarantors of the eurozone's rescue fund, the EFSF, which would in turn also need to be downgraded.


Germany would then become the only major AAA-rated economy underwriting the fund.
This would make it more difficult to raise funds to bail out weaker countries, like Italy and Spain, if the need arose.

Standard & Poor - Downgraded France, Italy and Austria's credit ratings with more to come.

But Mr Larsen added that the move by Standard & Poor's (S&P) would not be particularly surprising, as the ratings agency had put several eurozone countries, including Germany, on notice a few months ago.


He said the downgrades would provide a "reality check" to the markets that the eurozone's problems are nowhere close to being solved.


Germany, The Netherlands, Finland and Luxembourg are among the countries not believed to be affected by a downgrade.


The announcement is particularly bad news for Nicolas Sarkozy who faces presidential elections later this year and has staked much of his reputation on being the man to lead France out of the crisis.
Valerie Pecresse, a French government spokeswoman, told a television channel in the country: "France today is a safe investment, it can repay its debt and the news concerning our deficit is better than expected."


Last December, when rumours of a potential French downgrade began, politicians in the country reacted strongly, suggesting that any downgrade would be unjustified.


It was even suggested publically by one senior figure that Britain should be downgraded before France because it had "as much debt, more inflation, less growth than us and...credit is slumping".
Reports of a breakdown in talks between Greece and its banks to restructure its debts also fuelled fears of a default.