RATINGS agency Fitch has put Spain's sovereign rating on watch for a possible downgrade, citing risks stemming from fiscal consolidation, bank restructuring and a weak economic recovery.

Fitch praised the Spanish government's structural reforms in the areas of state pensions and the labour market, but said the long-term impact of restructuring of the country's savings banks in particular posed risks to the sovereign's AA-plus credit rating. “The negative outlook reflects the downside risks to Spain's sovereign credit profile from a weak economic recovery, banking sector restructuring and fiscal consolidation, especially by regional governments,” Douglas Renwick, sovereign credit analyst at Fitch, said in a statement. Spain has been under intense market scrutiny in recent months on concerns about the debts of its banking system.