Unless I'm mistaken, we may be witnessing the first AAA sovereign rating downgrade since the financial crisis erupted in 2007 (I haven't followed the news enough to know if another AAA was cut—anyone know?.) Fitch downgraded Spain from AAA to AA+ today. S&P downgraded Spain a month ago and now with the Fitch downgrade, a majority of the rating agencies have cut their rating. The Globe & Mail reports on the story:
Fitch Ratings cut Spain’s credit ratings to double-A-plus from triple-A on Friday, saying its economic recovery would be more muted than the government forecast due to strict austerity measures passed this week.
The downgrade follows a cut by another agency, Standard & Poor’s, last month and heaps more pressure on the government, battling to reassure markets its fiscal, political and social woes will not end up in a Greek-style debt crisis.
“The downgrade reflects Fitch’s assessment that the process of adjustment to a lower level of private sector and external indebtedness with materially reduce the rate of growth of the Spanish economy over the medium-term,” Fitch’s analyst Brian Coulton said in a statement.
Ironically, as life would have it, trying to reduce the debt, which will likely weaken economic growth and government tax revenue, resulted in the cut. Tags: Europe