BRUSSELS (MNI) – Concern about Spain’s medium-term growth prospects
was the main factor behind a decision to downgrade the rating of the
country’s sovereign debt, Brian Coulton, Fitch Rating’s head of Europe,
Middle East and Africa ratings said on Tuesday.
External indebtedness and the adjustment to the fiscal measures
being brought in will stymie the country’s growth prospects over the
medium term, Coulton told Bloomberg News in an interview.
Last week Fitch Ratings stripped Spain of its top AAA credit
rating, downgrading the country to AA+.
“This decision was based on a reassessment of the medium-term
growth assessment,” Coulton said, adding that the country has a “high
level of private sector debt” and “a lot of external debt, and that
external debt will need to be served.”
He acknowledged that the fiscal response employed by Spain to bring
down its deficit “has been pretty strong.”
But he said Fitch Ratings still had concerns about the labor market
and credit supply to the real economy.
Problems with unions could hamper labor market reform discussions
and make wage adjustment more difficult, he said.
Coulton said all countries with the top triple-A rating needed to
apply a “strong policy response” in order to retain their top rate.
“We are in a difficult period,” he said, adding that the ratings
agency was looking for “details and a fast adjustment.”
“It’s going to be pressured for the next couple of months,” he
said.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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