June 12 - Fitch Ratings downgrades 18 Spanish banks less than a week after the agency cut the country's sovereign debt rating. Sonia Legg reports.
Last week it cut Spain's sovereign debt rating now Fitch has downgraded 18 Spanish banks. Recently part nationalised Bankia is one of them. Fitch expects Spain to remain in recession until at least the end of next year instead of seeing a recovery in the middle of it. The dowgrade comes as 10 year Spanish bond yields rose to a euro-era high. Daniel Alvarez from XTB brokers in Madrid says investors consider the euro zone's plan to lend Spain up to 100m euros to recapitilise its banks nothing more than a sticking plaster. (SOUNDBITE) (Spanish) DANIEL ALVAREZ, ANALYST AT XTB BROKERS, SAYING: "First we don't know the details of the plan and it seems that in Europe everyone has a conflicting voice. Secondly, the timing is important. Urgent measures were needed but the next important event in the markets is the Greek elections this weekend." The headline in Spain's El Mundo hints at concerns over Italy too. It follows comments by Austria's finance minister that the euro zone's third largest economy may need a financial rescue because of its high borrowing costs Will Hedden is a sales trader at IG Index. (SOUNDBITE) (English): WILL HEDDEN, SALES TRADER, IG MARKETS, SAYING: "This will be the story we focus on as we head into the weekend, we have got bond yields for Italy above six percent and Spain still at six and half percent so this is what we are gong to talking about for the next couple of days." EU commissioner Ollie Rehn says he's confident the rescue will help solve Spain's economic problems. (SOUNDBITE) (English) EUROPEAN COMMISSIONER FOR ECONOMIC AND MONETARY AFFAIRS, OLLI REHN, SAYING: "With this thorough restructuring of the banking sector of Spain, together with the ongoing determined implementation of structural reforms and fiscal consolidation, Spain can gradually regain confidence and create the conditions for a return to sustainable growth and job creation." But a Greek exit from the euro could make that a little harder to achieve. EU officials say they don't expect that to happen. But they are discussing measures, including limiting cash withdrawals, should the worst-case scenario occur. Sonia Legg, Reuters