Fitch Ratings has cut the credit ratings of Italy, Spain and three other euro zone countries, while Ireland's BBB-plus rating is maintained, albeit with a negative outlook.
The downgrades, flagged a month ago by Fitch, come as Greece negotiates with creditors on how to avoid a default and other euro nations struggle to bolster the region's defenses against contagion should those talks fail.
Fitch said the ratings cut for Italy, Spain, Belgium, Slovenia and Cyprus had been made because the counties lack financing flexibility in the face of the euro zone debt crisis.
The ratings agency said these countries have near-term vulnerability to monetary and financial shocks. "Consequently, these sovereigns do not, in Fitch's view, accrue the full benefits of the euro's reserve currency status," it said.
Italy, the euro zone's third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-.
Ratings on Belgium, Slovenian and Cyprus were also lowered.
While sovereign-bond yields have fallen in Italy, Spain and elsewhere in recent weeks as the European Central Bank added liquidity, the 17-nation euro zone still lacks the protection it needs for such a situation.
Fitch placed Spain, Italy, Ireland, Cyprus, Belgium and Slovenia on review in December for possible downgrades, citing Europe's failure to find a "comprehensive solution" to the region's crisis. Fitch lowered the outlook on France's AAA rating at the same time, though the company said last month that France's rating probably wouldn't be cut this year.
Italy's credit rating was cut two levels to BBB+ last week by Standard and Poor's, which also downgraded eight other euro- region nations including France and Austria, citing European leaders' inability to contain the debt crisis.
Bloomberg
