MADRID, Jan 13 (Reuters) - Spain's Economy Minister acknowledged a risk on Tuesday that major rating agencies might downgrade the country from its "AAA" credit status, although Fitch said it was holding its top-notch rating on the debt.
Spain on Monday became the third euro zone country since Friday to be warned by Standard & Poor's that its credit rating is under threat from the global credit crisis that continues to wreak economic havoc across Europe.
Asked on Tuesday about the chances of a downgrade, Economy Minister Pedro Solbes departed from a bullish government line to tell reporters: "It's a risk. Obviously in the case of Standard & Poor's, (but) there are other rating agencies as well."
Fitch said prudent banking supervision and relatively restrained public borrowing in the past meant Spain still compared well with its peers.
"We have Spain on a AAA rating with stable outlook and that remains our view despite the recent deterioration and the fiscal outlook," Fitch's head of global economics Brian Coulton told Reuters in a telephone interview.
The government said on Monday it did not expect S&P to carry out its threat and would put public accounts in order.
Prime Minister Jose Luis Rodriguez Zapatero echoed that stance on Tuesday, telling Onda Cero radio: "There are no reasons for it, firstly because of the strength of the country (and) because the public accounts are solvent."
SPAIN CREDITED WITH HEADROOM
As in the case of Ireland and Greece last Friday, S&P said Spain faces a painful rebalancing of its economy and a marked deterioration of its public finances.
Fitch's Coulton said he expected Spain's government debt to rise to 48 percent of gross domestic product (GDP) at the end of 2009 from 38 percent at end 2008.
However, that would still be around 20 points below debt levels in 'AAA'-rated countries such as France and Germany.
"We do have a significant rise in the Spanish government debt-to-GDP ratio but it will remain below France, below Germany, below the UK, in our assessment, even by the end of next year, so that starting fiscal position is important."
Coulton also noted Spain's banking system had been less damaged than others, thanks to Bank of Spain supervision.
"Fiscal support for banking sectors which is driving up public debt quite rapidly in other countries is not having such a significant effect in Spain at this point," he said.
Even so, 10-year Spanish bonds on Tuesday yielded the most over Bunds since at least 1999, when the euro was created, according to Reuters charts.
"It's true that there is a certain differential in our valuation in terms of the cost of financing, which reflects our reality," Economy Minister Solbes said.
Speaking at the opening of an exhibition on 10 years of the euro at the Bank of Spain, he said Spain's public sector budget deficit was likely to be just above an EU limit of 3 percent of GDP in 2008 and considerably above it in 2009.
S&P says the deficit will peak at 6 percent of GDP in 2009 after the government launched over 70 billion euros in stimulus measures, while Fitch's Coulton forecast it would hit 5 percent and likely remain at 5 percent in 2010.
The global squeeze on financing has burst Spanish housing and consumer spending booms and sent unemployment to the highest rate in the European Union at 13.4 percent in November. Spain's economy entered its first recession in 15 years during the fourth quarter.
(Reporting by Sarah Morris and Andrew Hay; writing by Ben Harding and Andrew Hay; Editing by Ruth Pitchford)