SODOM & GOMORRAH: Spain, Italy, Belgium, Slovenia, and Cyprus were downgraded by Fitch Ratings. The agency claims that the Eurozone countries lack the appropriate financial flexibility to deal with the regional debt crisis. Surprise.
Italy was cut two points from an A+ rating to an A-. Spain was also lowered two points from AA- to A. Belgium was slashed from AA+ to AA. Slovenia found itself facing the same cut as Spain. Cyprus was pared to BBB- from BBB. The countries may be downgraded again within two years.
Fitch warned Europe about the pending downgrades last month when negotiations about Greek debt came to an impasse. The rating agency doesn’t feel that Europe is capable of handling the financial panic that would follow a default by a larger country such as Greece. Fitch’s report said, “The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability” that would come from financial shocks. “These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve-currency status.”
The report was followed by some hand-wringing and apologizing from law makers in various parts of the world. European leaders are scheduled confer about future conferences on January 30th in Brussels.