Lower ratings yet possible

Fitch Ratings said yesterday it was reviewing the credit ratings of six eurozone countries, warning that their credit scores could be downgraded.

Placing Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on Ratings Watch Negative “indicates that the above ratings are under active review and are subject to a heightened probability of downgrade in the near-term”.

The ratings agency added that any downgrades of ratings would likely be limited to one or two notches and that it expects to decide by the end of January.

Belgium currently has an AA+ rating from Fitch, Spain AA-, Slovenia AA-, Italy A+, Ireland BBB+, and Cyprus BBB. Fitch also changed the outlook on France’s top triple-A rating to negative. “Fitch has concluded that a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach,” following the crisis summit last week at which the pact was announced.

All EU states except for Britain agreed last week to draft a strict pact with penalties to ensure they cut budget deficits and reduce their debt, aiming to get it drafted and signed by March.

While Fitch praised announcements that private bond holders would no longer be asked to accept losses in bailouts and the eurozone’s permanent bailout fund would be brought into operation sooner, it expressed concern over the absence of a credible financial backstop.