Denis Doyle/Bloomberg

At the Principe Pio metro station in Madrid on Sept. 23, 2011.

At the Principe Pio metro station in Madrid on Sept. 23, 2011. Photographer: Denis Doyle/Bloomberg

Jan. 27 (Bloomberg) -- Spain, Italy, Belgium, Cyprus and Slovenia had their debt ratings cut by Fitch Ratings, while Ireland had its ratings affirmed. Julie Hyman reports on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Fitch Ratings cut the credit ratings of Italy, Spain and three other euro-area countries, saying they lack financing flexibility in the face of the regional debt crisis.

Italy, the euro area’s third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-. Ratings on Belgium, Slovenian and Cyprus were also lowered, while Ireland’s rating was maintained.

The downgrades, flagged a month ago by Fitch, come as Greece negotiates with creditors on how to avoid a default and other euro nations struggle to bolster the region’s defenses against contagion should those talks fail. While sovereign-bond yields have fallen in Italy, Spain and elsewhere in recent weeks as the European Central Bank added liquidity, the 17-nation region still lacks the protection it needs for such a situation.

U.S. Treasury Secretary Timothy Geithner warned European leaders in Davos, Switzerland, on Jan. 27 that the U.S. isn’t willing to provide more support unless they act first.

“The only way Europe’s going to be successful in holding this together, making monetary union work, is to build a stronger firewall,” Geithner said at the annual meeting. “That’s going to require a bigger commitment of resources.”

Fitch placed Spain, Italy, Ireland, Cyprus, Belgium and Slovenia on review on Dec. 16 for possible downgrades, citing Europe’s failure to find a “comprehensive solution” to the region’s crisis. Fitch lowered the outlook on France’s AAA rating at the same time, though the company said in January that France’s rating probably wouldn’t be cut this year.

Italy’s credit rating was cut two levels to BBB+ last week by Standard & Poor’s, which also downgraded eight other euro- region nations including France and Austria, citing European leaders’ inability to contain the debt crisis.

The fallout in financial markets to S&P’s action was muted. Spain on Jan. 17 paid an average 2.049 percent to sell 12-month debt, compared with 4.05 percent on Dec. 13. The previous day, France auctioned 1.895 billion euros ($2.5 billion) of one-year notes at a yield of 0.406 percent, down from 0.454 percent on Jan. 9.

Italy’s 10-year bond yield dropped below 6 percent on Jan. 27 after ending last year with a yield of more than 7 percent.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

(Blomberg)