Fitch cuts Italy, Spain ratings; says outlook negative

Fitch Ratings has downgraded the foreign and local currency long-term IDRs of Italy to 'A+' from 'AA-', with negative outlook, amidst a worsening of the euro zone crisis. Fitch also downgraded Spain's sovereign credit rating by two notches to AA-minus from AA-plus, again with negative outlook.

The negative outlook means the rating agency could still downgrade ratings of the two European countries unless these economies show some signs of improvement.

Italy's sovereign risk profile has been affected by the significant financial and economic shock of the euro zone debt crisis, Fitch Ratings said.

"The downgrade primarily reflects two factors: the intensification of the euro area crisis and secondly, risks to the fiscal consolidation effort arising from the budgetary performance of some regions and downward revision by Fitch of Spain's medium-term growth prospects," Fitch said.

The rating downgrade comes as both Italy and Spain gets more and more embroilled in the euro zone debt crisis. Both governments are dependent on the European Central Bank to buy their bonds in order to prevent yields from rising to unwieldy levels.

A negative outlook for Italy and Spain, the third and fourth largest economies in the euro zone, suggest [possible downgrades of larger economies as well.