Fitch Ratings cut Spain’s credit ratings to AA+ from AAA 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 and 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.
It kept its outlook stable.
The government is struggling to agree crucial labour reforms with unions and the threat of a general strike. It just managed to pass a strict austerity package on Thursday by a single vote.
On the bright side, Spain was able to pass austerity measures. One can only hope U.S. leaders muster the political will to get our fiscal house in order before we suffer a debt crisis of our own.