Spain on negative outlook

Credit ratings agency, Moody’s, have maintained the A3 bond rating for Spain, it said in a statement.

However, the country is under negative outlook due to the challenge of it’s budget constraints, which suggests that further fiscal adjustments will be required this year. This is despite Prime Minister Mariano Rajoy successfully reducing the country’s deficit target.

“The easier targets do not affect the country’s A3 government bond rating with negative outlook because Moody’s had already incorporated a likely deviation from original fiscal targets and a slower pace of fiscal consolidation into its analysis,” the statement said.

“While the revised fiscal target for 2012 is more realistic than the previous one, Moody’s believes that the Spanish government will still need to implement a substantial fiscal adjustment this year,”

The agency also suggested that “profound structural reforms” must be put in place in Spain’s autonomous regions to guarantee the country can meet it’s targets

Last Friday, Bank of Spain figures showed the country’s public debt had increased dramatically to 68.5% of GDP, the highest for 16 years, and 8.5 points over the 60% target agreed with the European Union.

However, a caveat must be added here as various opinions say that Spain’s debt-to-GDP ratio is massively understated because it does not include the debt’s of the autonomous regions, nor government guaranteed bank debts.