SPAIN YESTERDAY became the third euro zone country since Friday to be warned by Standard Poor’s rating agency that its credit rating is under threat from the global credit crisis that continues to wreak havoc in Europe.
Just as in the case of Ireland and Greece last Friday, SP said Spain faces a painful rebalancing of its economy and a marked deterioration of its public finances.
The gloomy news further extended the euro’s losses against the US dollar and the yen on Monday and Fitch Ratings also weighed in by saying Ireland’s debt grades could be hurt by the country’s ballooning budget deficit.
Spain and Ireland have both been hit hard by the collapse of their respective property booms, contributing to burgeoning unemployment and shrinking government revenues.
SP said Spain’s credit-driven economy was particularly ill-equipped to cope with the global slowdown and risked years of weak growth. “The Creditwatch placement reflects our view of the significant challenges facing the Spanish economy as it traverses a period of very weak growth,” Standard Poor’s said in a statement.
Fitch Ratings said Ireland’s rising budget deficit could affect the outlook for its sovereign debt rating but the Irish economy may reach “rock bottom” and start recovering sooner than other countries.
“I find it very difficult to keep up – so fast the news from Ireland deteriorates,” Fitch Ireland analyst Chris Pryce told reporters.
“Tax receipts have fallen through the floor and that of course means a huge deficit, especially for this coming year and no obvious end in sight,” Mr Pryce said.
“It could well affect the outlook for ratings, he added.
He would not comment on any specific rating moves planned. Fitch rates Ireland AAA.
