Fitch cuts rating of five eurozone countries

Rating agency Fitch cut its ratings of five eurozone countries including Italy and Spain, citing their poor finances and vulnerability to sharp turns in market sentiment. Fitch dealt full downgrades to Italy, Spain, Belgium, Slovenia and Cyprus, and lowered its outlook on Ireland, saying the "near-term economic outlook highlight(s) the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments." Fitch hit at European politicians' "gradualist approach" to systemic reform in the eurozone as Greece teeters on a debt default and the financial turmoil stalls economic growth. "In Fitch's opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery," the agency said in a statement. "It is evident that further substantial reforms of the governance of the eurozone will be required to secure economic and financial stability, including greater fiscal integration." The action came ahead of a key European Union summit in Brussels on Monday where leaders are to discuss a fiscal compact aimed at resolving the eurozone debt crisis. Italy, Spain and Slovenia all were cut by two notches, with Fitch saying that Italy faced too-slow growth against its rising debt and Spain faced "a significantly worsened fiscal and economic outlook." Italy was downgraded to "A-", and Spain and Slovenia to "A"; Belgium dropped one notch to "A," as did Cyprus, at "BBB-". Ireland's rating at "BBB" was maintained, but Fitch put the country on a "negative outlook," signaling it could be in line for a downgrade. Fitch said the negative outlooks is placed on the six countries, as well as those on France and Portugal, primarily reflected the risk that the crisis could intensify further. "A deeper and more prolonged economic recession than currently anticipated would undermine political support for, and public acceptance of, fiscal austerity and structural reform," it said. "It would also have the potential to weaken the commitment of the economically and fiscally strongest eurozone countries, and the ECB, to providing necessary support to eurozone peers.