Fitch downgrades Catalonia to junk bond status over secession drive

AFP - [email protected]
Fitch downgrades Catalonia to junk bond status over secession drive

The ratings agency has cut Catalonia's rating by two notches after the parliament of Spain's wealthiest region voted to start a secession process.


The agency, which downrated Catalonia to BB  in the"speculative" or junk territory - , said its decision was based on growing tensions with the central government in Madrid, which to date still supports Barcelona's finances.

The downgrade to a negative outlook comes a day after Spain's Constitutional Court, at the request of the national government, suspended the resolution passed by Catalonia's parliament that declared the start of a secession process.

The regional government of Catalonia has however vowed to push ahead despite the court's ruling.

"Whatever measures the central government decides to adopt, it is likely to result in increased tensions between the two governments and possible civil disruption in the region," Fitch said in a statement.

The agency also said the region would need funding to finance its expected budget deficit for 2015, estimated to be around two percent of regional Gross Domestic Product.

"Catalonia's liquidity is fragile and there is uncertainty as to whether the region will continue to receive liquidity support from the central government under the same terms," it said.

"Fitch will continue to monitor developments in Catalonia and may take further negative rating action as appropriate," it added.    

All other Spanish regions remain on a BBB- rating, Fitch said.


Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also