The Greek Contagion throws up bad news everyday.Not a day passes by it seems when the Markets and the Euro are rocked from the PIIGS.The Spanish Banking sector has been in the news lately with the “Cajas” being seized or merged together by the Spanish Central Bank.Spurred by the Greek funding problems , European countries have been zealously cutting Fiscal Deficits.Italy,Greece,Portugal,UK and Spain have been putting up austerity plans in place to reassure the Bond markets that they have a plan in place to repay their massive Debt obligations.However the fiscal deficut cuts could backfire in those countries as GDP contracts making the debt repayments even more difficult.This has led to Fitch cuting Spains AAA rating by a grade . The PIIGS face a Catch-22 situation as they are condemned if they cut their Fiscal Deficits and condemened if they don’t
Spain Loses AAA Rating at Fitch on Concern Debt Burden Will Hamper Growth- Bloomberg
Spain lost its AAA credit grade at Fitch Ratings as Europe battles a debt crisis that’s prompted policy makers to forge an almost $1 trillion bailout package for the region’s weakest economies.The ratings company cut the grade one step yesterday to AA+ and assigned it a “stable” outlook, according to a statement from London. Spain has held the top rating at Fitch since 2003. Standard & Poor’s lowered Spain’s ratings to AA on April 28.
Spain is struggling to cut the euro region’s third-largest budget deficit as the economy, still reeling from the collapse of a debt-fueled construction boom, is forecast to contract for a second full year. Prime Minister Jose Luis Rodriguez Zapatero, who has angered traditional allies by cutting public wages and freezing pensions, has failed to convince investors he can put the finances back in order as borrowing costs continue to surge.