Fitch Ratings cut Spain's credit ratings to AA+ from AAA on Friday, saying its economic recovery would be more muted than the government forecast due to strict austerity measures passed this week.
The downgrade follows a cut by another agency Standard and Poor's last month and heaps more pressure on the government, battling to reassure markets its fiscal, political and social woes will not end up in a Greek-style debt crisis.
The downgrade reflects Fitch's assessment that the process of adjustment to a lower level of private sector and external indebtedness with materially reduce the rate of growth of the Spanish economy over the medium-term, Fitch's analyst Brian Coulton said in a statement.
It kept its outlook stable.
The government is struggling to agree crucial labor reforms with unions and the threat of a general strike. It just managed to pass a strict austerity package on Thursday by a single vote.
S&P downgraded Spain's ratings one notch to AA from AA+ with a negative outlook at end-April.
Moody's is the only agency that has not downgraded Spanish sovereign credit rating and still gives it a rating of AAA.
One Madrid-based banker said the impact on markets would be neutral, seeing as the agency had kept its outlook stable.
Fitch is bringing its rating in line with S&P's, the banker, a director at an international bank, said, asking not to be named. The hounddogs are always chasing after each other. But with the outlook still stable, the impact should be null to positive.