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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/03/credit-agency-downgrade-for-spain.jpg"><img class="alignnone size-full" title="Spain's outlook has been downgraded by credit agency Fitch" src="http://londonglossy.com/wp-content/uploads/2011/03/min-credit-agency-downgrade-for-spain.jpg" alt="Spain's outlook has been downgraded by credit agency Fitch"/></a></p>
<p>The economic recovery in Europe has been dealt a blow as a key credit agency downgraded its outlook for Spain, one of the continent&#8217;s major players.</p>
<p>The impact of restructuring its savings banks and tough austerity measures are a major risk to Spain&#8217;s future and prompted Fitch Ratings to revise its outlook for the country from stable to negative.</p>
<p>The potential for greater stress in European financial markets if a credible response to the eurozone debt crisis is not found by EU leaders also weighs on Spain&#8217;s hopes for recovery, the agency warned.</p>
<p>Economists have raised concerns over the threats the eurozone crisis in Europe pose to the UK economy. A weakened eurozone could hit the UK&#8217;s export trade &#8211; seen as key to a healthy economic recovery.</p>
<p>Spain is struggling to emerge from nearly two years of recession and has the highest unemployment rate in the eurozone and a swollen budget deficit.</p>
<p>Spain&#8217;s &#8220;relatively high&#8221; level of debt to foreign nations makes the economy more vulnerable to a &#8220;credit shock&#8221; if the broader eurozone crisis deepens, Fitch warned.</p>
<p>The eurozone has come under increasing scrutiny since Greece needed a 110 billion euro (£93 billion) bailout from the EU and the IMF&#8217;s European Financial Stability Facility in May. Ireland followed suit in November and was forced to accept a £72.5 billion bailout.</p>
<p>Portugal, Spain and Italy have been tipped by many as the next potential casualties in line for financial aid.</p>
<p>However, Fitch affirmed its AA+ rating for the Ireland&#8217;s debt in light of the government&#8217;s aggressive response to the economic downturn.</p>
<p>Despite a relatively strong &#8220;core&#8221; banking sector dominated by Santander and BBVA, Fitch said concerns about the potential costs to the government of restructuring the savings bank sector weighed on the country&#8217;s economic outlook. The agency expects the amount of extra capital required by the banking system to be 38 billion euros (£32 billion).</p>
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