Another downgrade for Spain

The Spanish government's efforts to bring down its sovereign debt was made a little more difficult on Thursday when one of the three major ratings agency slashed the country's long-term rating.

The London and New York based agency Fitch cut Spain's sovereign debt rating by three notches to BBB from A due to concerns about the country's growing level of debt, a deepening recession, and a crisis in its banking industry in particular.

"The likely cost of restructuring and recapitalizing the Spanish banking sector is now estimated by Fitch to be around 60 billion euros ($75 billion) and as high as 100 billion euros in a more severe stress scenario," the agency said.

That is more than double the agency's previous estimate of what it would take to repair a banking industry that has been severely damaged by its high exposure to a collapsed real estate market.

"The much reduced financing flexibility of the Spanish government is constraining its ability to intervene decisively in the restructuring of the banking sector and has increased the likelihood of external financial support," Fitch added.

However, even before the news of the downgrade broke, the head of the panel of eurozone finance ministers known as the Eurogroup, Jean-Claude Juncker, promised help for Spain.

"If it came to it and Spain asked for support for its banking sector, that would obviously be done," Juncker said in a speech to discuss the eurozone crisis at the European Economic and Social Committee in Brussels. At the same time, though, he stressed that "as there is no request, it is too early to spend time on figures."

Juncker, who is both the finance and prime minister of Luxembourg conceded though that the Europe Union was in a "real stress moment ... (we are) going through crucial weeks both for the EU and the single currency."

pfd/mz (AFP, dpa, Reuters, AP)