Belgium: AA+ to AA
Spain: AA- to A
Italy: A+ to A-
Cyprus: BBB to BBB-
Slovenia: AA- to A
While Fitch says that it supports EU leaders actions to address the crisis so far, a lot more has to happen before these countries are out of trouble:
In Fitch's opinion, the eurozone crisis will only be resolved as and when there is broad economic recovery. 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 first statement seems tautological. The second suggests that Fitch agrees with the current thinking in EU that the solution lies in greater economic integration. As I have stated on this blog earlier, it is the problem. Increased fiscal integration will only exacerbate matters.
Fitch also suggested that large-scale purchases of sovereign bonds by domestic banks has not helped:
...the divergence in monetary and credit conditions across the eurozone, and near-term economic outlook highlight the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments.Of course, Fitch knows its proposed solution of greater integration to address 'greater divergence of credit conditions in the EU' means transfers of wealth from the EU core (northern nations) to the periphery (primarily southern nations), and there's little political appetite for it. Fitch is repeating the harebrained mantra of EU bureaucrats. Is Fitch trying to give Eu political room for this action, or does it also not realize that doubling down on the failed tactic and expecting a different outcome is the definition of insanity?
The first thing to do when you find yourself in the hole - stop digging. Instead, Fitch is suggesting EU needs a bigger shovel.