“LONDON (Reuters) – The biggest threat to Spain’s investment grade status is its intensifying recession, Fitch’s head of sovereign ratingssaid on Thursday, although proposed support measures such asECB bond buying could help turn the situation around.
Spain, which continues to resist making a formal request for aid, is expected to see its economy shrink substantially over the next two years as the combination of high unemployment, painful spending cuts and an Exodus of capital bites.
The head of the country’s central bank admitted on Thursday that next year’s decline was likely to be closer to the 1.5 percent drop estimated by bank analysts than the 0.5 p0ercent forecast by the Spanish government last week.
“The biggest threat from our perspective to Spain’s investment grade status is actually that the recession there intensifies and that spills into greater concerns about bank asset quality as well as the solvency of the Spanish state,” David Riley said in an interview with Reuters Insider Television. (To watch click http://link.reuters.com/neb23t)”
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