Spain’s credit rating dropped

Ratings agency Standard & Poor have cut its credit rating on Spain by two notches, downgrading it from A to BBB-plus.

The agency cited expectations that Mariano Rajoy’s governments finances will deteriorate further during 2012 due to the contracting economy and the struggling banking sector.

The agency also placed a negative outlook on the country and said the situation in Spain could deteriorate further without intervention from Europe.

“We think risks are rising to fiscal performance and flexibility, and to the sovereign debt burden, particularly in light of the increased contingent liabilities that could materialise on the government’s balance sheet,” S&P said in a statement.

This was the first downgrade since Rajoy’s Partido Popular took office in December 2011.

Spain’s economy ministry said the downgrade did not reflect the impact that planned reforms would have on reactivating the economy which fell into technical recession following two consecutive quarters of contraction.

Speaking to Reuters a spokesperson said “They haven’t taken into consideration the reforms put forward by the Spanish government, which will have a strong impact on Spain’s economic situation.”

The government have already announced 50 billion euros of cuts and reforms, including efforts to support the many banks drowning under bad property loans.

S&P called on euro zone countries to better manage the debt crisis adding that the Spanish outlook could get worse without strong measures being introduced at a European level.

Other ratings agencies also have Spain marked with a negative outlook. Moody’s Investors Service rates Spain as A3 while Fitch Ratings rates the country as A.

Spain doesn’t need economic lessons – says Rajoy

Mariano Rajoy

Rajoy says he knows what Spain needs

Standard & Poor, financial-market intelligence analysts, have once again downgraded Spain’s credit rating, this time from AA- down to A. This is the second downgrade by the agency in three months, the fourth since 2009. Spain was not the only country to suffer with Standard & Poor stating that “the oulooks on our long-term ratings on all but two of the 16 euro-zone sovereigns are negative.” Only Germany and Slovakia are “stable”.

One of the reasons for the downgrade was that as the agency believes the various EU summits and meetings have failed to  produce “a breakthrough of sufficient size and scope to fully address the eurozone’s financial problems”. The report went on to say that the downgrade “reflects our view that the effectiveness, stability, and predictability of European policymaking and political institutions have not been as strong as we believe are called for by the severity of a broadening and deepening financial crisis in the eurozone.”

In response to the report Spanish prime minister Mariano Rajoy says he knows exactly what Spain needs to improve its economy and it’s credit rating, as well as to create employment.

Rajoy said he intends to go before the European Commission on January 30th to “tell them what I believe needs to be done as a clear response to defend the Euro, control deficits and introduce economic reforms”.

He went on to say that “We are living in difficult times, but the government I preside knows perfectly well what it needs to do to improve Spain’s reputation, stimulate growth and create jobs,” Rajoy said but gave no details of his plan.

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