Fitch cuts Spain rating two notches to AA-, outlook negative

Fitch Ratings slashed Spain's sovereign credit rating by two notches Friday, blaming regional government spending, weak economic growth and the eurozone debt crisis.

Fitch cut Spain's rating to AA-minus from AA-plus and said the outlook was negative, meaning it could be lowered again.

"The downgrade primarily reflects two factors: the intensification of the euro area crisis and secondly, risks to the fiscal consolidation effort arising from the budgetary performance of some regions and downward revision by Fitch of Spain's medium-term growth prospects," it said.

The ratings agency said a "credible and comprehensive solution" to the eurozone debt crisis "is politically and technically complex and will take time to put in place and to earn the trust of investors.

"In the meantime, the crisis has adversely impacted financial stability and growth prospects across the region," it added.

Fitch predicted Spain's annual economic growth would remain below two percent through to 2015.

The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of a property bubble. It stabilised in 2010 but growth remains anaemic.

Economic output grew 0.2 percent in the second quarter from the previous three months, after a revised 0.4-percent expansion in the first quarter.