Fitch says the downgrade reflects negative economic and market environment in Spain. (File photo)
Source: Press TV
Fitch credit ratings agency has downgraded Spain’s rating by three notches citing the country's banking crisis, mushrooming debt and recession as the main reasons for the downgrade.
The international agency announced on Thursday that it has cut Spain’s long-term foreign and local currency to 'BBB' from 'A' with a negative outlook.
According to a Fitch’s statement, the European state’s short-term rating has also been downgraded to 'F2' from 'F1'.
“Spain is forecast to remain in recession through the remainder of this year and 2013 compared to Fitch's previous expectation that the economy would benefit from a mild recovery in 2013,” the statement added.
Fitch also noted that Spain's high level of foreign debt has rendered it especially vulnerable to contagion from the ongoing crisis in Greece.
Meanwhile, the European Union is calling on Madrid to come clean on how it plans to finance the overhaul of its banking sector.
Spain, the eurozone’s fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.
Spanish Economy Minister Luis de Guindos said after talks at the European Commission on Wednesday there were no immediate plans to apply for a bailout.
Spain would await the results of a report by International Monetary Fund (IMF) and an independent audit of the banking sector, both due this month, before taking decisions on how to recapitalize the banks, the Spanish official said.
Spain’s central bank reported last month that the country's economy will shrink in the second quarter of 2012, with the recession expected to continue until at least mid-2012.