S&P downgrades Spain

27 April 2012

Spain's uncertain economic prospects have resulted in a leading credit agency cutting the country's rating.

It emerged this morning (27 April) that Standard & Poor's (S&P) has decided to reduce the embattled Iberian nation's rating by two notches down to BBB+ amid fears it is facing a difficult period ahead.

Within its report, S&P predicted the Spanish economy will contract by 1.5 per cent in 2012, followed by further negative growth of 0.5 per cent next year.

Consequently, the agency noted it has no choice but to place the state on a negative outlook for the coming months as it may need to take on more debt in order to prop up its ailing banking industry.

"We think credit conditions … could now deteriorate further than we anticipated earlier this year unless offsetting eurozone policy measures are implemented," S&P stated.

Earlier this week, the International Monetary Fund published analysis indicating that around 90 per cent of Spain's largest banks would be able to cope with another downturn.

By Gary Cooper

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