Fitch threatens to lower Catalonia credit rating

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30 Sep, 2014 Updated Tue 30 Sep 2014 09:20 CEST
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Ratings agency Fitch put Catalonia on review Monday for a possible downgrade, saying the region's showdown with Spain's central government over its plans to hold an independence referendum in November could affect its creditworthiness.


In a statement, the agency said it had put the regional government of Catalonia's "BBB-" score on "rating watch negative" after Catalan president Artur Mas on Saturday signed a decree on Saturday calling for the non-binding referendum on November 9.

Spain's central government on Monday moved to block the referendum by asking the Constitutional Court to declare the vote illegal on the grounds that it violates the constitution.

The court ordered the referendum suspended while it considers the central government's arguments.

Fitch said: "The ratings watch action reflects increased tensions between the central and regional government of Catalonia following the latter's unilateral call for a non-binding consultation on the future of the region within Spain or as an independent country, on 9 November."

It added that "tensions between both governments are likely to increase, particularly in the run-up to the consultation date".

Fitch said it in March 2013 assigned all of Spain's regional governments, including Catalonia, a rating floor of "BBB-" based on the assumption that the central government would continue to provide them with aid such as access to a regional liquidity fund.

"However, this floor is also subject to the co-operative relationship between the regions and the central government and Fitch considers this as difficult in the case of Catalonia under present circumstances," it said.

"Although Fitch expects that the central government would continue to financially support Catalonia, as a default would have negative implications for all regions trying to access the capital markets, as well as for the central government, developments over the next six weeks are likely to complicate the relationship between Catalonia and the central government."

Fitch said it would resolve the rating watch in the next three to six months. If it decides to downgrade Catalonia's credit rating, it said it would so "by at least two notches".



2014/09/30 09:20

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