Fitch degrades the note of Catalonia – The Tribune.fr

The adoption by the Catalan parliament of a separatist resolution has not pleased Fitch. The ratings agency downgraded Thursday, November 12 two notches the rating of long-term debt of Catalonia, passing it to speculative grade, to “BB”.

This northeastern region Spain had previously noted “BBB”. This decision is subject to a negative outlook, which means that Fitch could further reduce the medium-term note.

Risk of “increased tensions”

The agency justifies this making by “tensions” that could lead to the growing crisis between the government in Madrid, which however still cover its liquidity needs, and the Catalan executive. The ratings agency said in a statement:

“Whatever the measures taken by the central government, there are risks they lead to tensions increased between the two governments and the social unrest in the region. “

The third most indebted region of Spain

The debt of Catalonia is one its weaknesses, about a third of its gross domestic product (GDP). Responsible for large budgets such as health, education and social services, some Spanish regions have indeed increased investment in the 2000s, before ending up trapped in the bursting of the housing bubble in 2008 .

Having lost the confidence of investors, they are no longer able to finance directly on the markets and the Spanish state had to create a special fund to support during the crisis. Catalonia, the wealthiest region of Spain in 2014, but the third most indebted, benefits from this fund, called FLA.

A process of independence “will not disrupt economic activity “.

Fitch said it had made its decision following the adoption by Parliament on Monday, a parliamentary resolution declaring ” solemnly “ ‘s opening of a process designed to lead the region’s independence in 2017. Parliament, dominated by a majority for independence since the elections on 27 September, states that it will submit to the decisions of most Spanish institutions and the Constitutional Court.

Fitch is concerned about the possibility of region to obtain financing in the future via the FLA. It believes, however, that the initiation of a process of independence “will not disrupt economic activity.”

The Standard and Poor’s rating agency had already downgraded Catalonia to “BB” in early October. The third major agency credit ratings, Moody’s assigns the rating “Ba2″.

(With AFP)