Fiscal austerity measures could hit corporate credit, analysts warn

As governments across Europe announce austerity measures designed to rein in deficits, sovereign and corporate bond investors are divided over the scale and timing of the cuts.

Credit analysts have raised concerns that the cost-cutting measures announced by Spain and Portugal may cause corporate spreads in those countries to widen.

Although the €750 billion EU-IMF bailout on May 9 did much to allay fears of sovereign default in the Eurozone, the support package came on the understanding Europe’s indebted peripheral economies would implement stringent fiscal measures in order to reduce their respective deficits, promising years of austerity ahead.

Both Spain and