Friday, May 28, 2010

Fitch Ratings removed Spain's AAA credit rating #SPAIN $STD


   Fitch Ratings removed Spain's AAA credit rating, dropping it by a notch, on
expectations that the moves to cut the nation's debt will slow its economic

  The downgrade to AA+, the second-highest possible rating, moves Fitch closer
in line with Standard & Poor's Ratings Service, which cut Spain's ratings to AA
last month.

  The outlook on the ratings is stable on Fitch's expectations the country's
credit profile will remain strong.

  Fitch said Friday that despite Spain's strong commitment to cutting its
budget deficit--including such measures as cutting civil service
pay--government debt is likely to reach 78% of gross domestic product by 2013,
compared with less than 40% before the onset of the financial crisis in 2007
and the subsequent recession.

  Fitch expects the "inflexibility" of labor markets and restructuring of the
nation's banking sector will hinder efforts to stabilize the economy.

  Fitch also expects the economic recovery will be more muted than Spain's
forecasts project, weighed down by a "significant" interest burden on its large
international debt that likely will curb disposable income.

  U.S. Treasurys prices extended a rally while U.S. stocks continued falling
Friday afternoon as the downgrade of Spain's sovereign credit rating added to
anxiety about the euro zone's debt crisis and the global economic growth
outlook, spurring demand for safe assets.

   -By Tess Stynes, Dow Jones Newswires; 212-416-2481;;

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