Three notches less for Spain. Rating agency Fitch downgraded its Spanish sovereign debt rating three notches from “A” to “BBB” with a negative outlook. Madrid is thus close to the speculative level and the negative outlook suggests that further cuts could be observed in the coming months. However, the move was foreseeable given the difficult conditions that the economy of the Iberian country is going through. According to Fitch 'the Spanish government's financial flexibility is “very limited” and “has increased the need for external financial support”.
The cost of aid for the restructuring and recapitalization of the banking system would amount, according to Fitch, to approximately 60 billion euros (The International Monetary Fund has estimated a range between 40 and 80 billion), twice the value initially estimated and about 6% of the gross domestic product. The rating agency also added that if the situation worsens, the total cost could rise to 100 billion, equal to about 9% of GDP.
Today, its high level of debt makes it "particularly vulnerable to the risk of contagion from the Greek crisis" and the restructuring of the banking system will increase the debt-to-GDP ratio to 95% in 2015. Furthermore, Fitch believes that Spain's recession will end only in 2014, while in 2013 growth will continue to be negative, contrary to what experts estimate.
This morning the Plaza de Madrid opened in the red at -1,14% while i Bonos-Bund spread reversed its downward trend to recover to 478 basis points.
