S&P cuts Spain’s credit rating to just one notch above junk grade

Madrid, Spain (4E) – Spain’s sovereign debt suffered another rating downgrade on Wednesday, this time from Standard & Poor’s Ratings Services, which cut its rating from BBB-plus to BBB-minus and kept its negative outlook on the troubled European nation, which is facing increasing pressures from the deepening recession.

The downgrade reflects the view of the credit ratings agency that Spain will struggle to return to economic growth, as well as the uncertainty in euro zone policies.

S&P doubts that all members in the 17-nation euro zone would agree to support Spain by recapitalizing its troubled banking system, which S&P thinks would even make the country’s debt problem even worse.

The downgrade means that Spain’s sovereign debt is just a single notch above junk status, and the negative outlook indicates that another downgrade could be on its way in the coming months.

S&P is also concerned about Spain’s rising unemployment and tough austerity policies that could lead to further social unrest and result to increased tension between Madrid and its regional governments.

The downgrade to BBB-minus aligns with the Baa3 rating by Moody’s Investors Service, which is also putting Spain into notice for another possible downgrade.

The ratings firm Egan-Jones has already brought down Spain’s rating to junk status.

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