Fitch has announced that by month’s end they would release “ratings watch negative” on six eurozone countries which include Ireland, Spain, Italy, Belgium, Cyprus and Slovenia. Each of these countries are struggling to cope with the debt crisis and each has accumulated too much debt, according to Fitch Ratings.
David Riley, who is head of sovereign ratings, stated that the verdict on those countries could be impacted by as much as two notches. Italy is the centre of focus at the moment as they are the third largest economy in the eurozone and as a result would be too costly to bail out, and as such is on the ‘front line.’
Rile further stated that it will be at the gates of Rome where the future of the single-currency euro will be decided. Unfortunately, even though Italy has a fairly low deficit in their budget, they still have massive debt to contend with and must raise up to €360 billion in tin the markets.
One of the reasons Italy has experienced problems in recent months is because investors have started demanding ever higher interest rates whilst lending money. Added to that was the fact that Italy’s prime minister of many years was forced to resign in the latter part of last year and these have worked together to set the backdrop for a dark economy.
On the upside, Mario Monti who has earned respect as an economist is now heading the government. Even so, Monti has a challenge ahead of him to convince investors that Italy has a proper strategy that is geared towards curbing spending along with a strategy to grow the economy.
These are not the only six eurozone countries with ratings on the line as France is also facing problems with the burden of its debt. Fortunately, as the second leading economy in the eurozone, France’s AAA rating is not yet in jeopardy. By month’s end, a clearer picture of the eurozone’s ratings should be evident.