S&P Downgrades Spain's Debt Rating, Citing Weak Growth

NEW YORK -- Standard & Poor's on Thursday downgraded its long-term debt rating on Spain, citing the country's weak growth prospects and risks facing its banks.

The Spanish economy is burdened by high unemployment, tight credit, heavy private-sector debt loads and prospects that its main trading partners will also stumble, S&P said in a statement.

"Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects," it said.

Spain's banking system will also likely weaken further as the pile of troubled assets rises, S&P said.

It cut its long-term rating to "AA-" from "AA." The outlook on the rating is "negative," which implies it could be lowered again at some point. But it affirmed its short-term rating of "A-1+" on Spain.

Spain is struggling to emerge from nearly two years of recession, and investors are fretting that Spain's soft economy will make servicing the country's debts increasingly difficult.

As a result, investors are asking for higher rates to lend money to Spain, raising fears that it could be next in Europe to require a rescue package. The S&P downgrade will likely further increase the cost of borrowing.

Moody's Investors Service has also warned it could soon downgrade Spain.

S&P said it now expects the Spanish economy, the fourth-largest in the eurozone, to grow about 0.8 percent this year and about 1 percent next year. Earlier this year, it had been forecasting 2012 growth of 1.5 percent.

Comments

[Dosadi]

10:44 PM on 10/14/2011

Spain needs to start a war...........................with S&P.

NOW!

[miriamfl]

10:52 AM on 10/16/2011

The developed world starting here should demand that these ratings companies be put out of business!

[slickbottom]

02:01 PM on 10/14/2011

Remind me. Why is it that we should care why S&P ratings mean anything? Aren't they the same clowns that... or forget it. The world turns.

[mbo2]

03:33 PM on 10/14/2011

"we" should not care

but those Europeans looking top live the good life of pseudo-welfare state bennies are gonna care big-time

[slickbottom]

07:41 PM on 10/14/2011

Oh... you mean developed countries, where the have higher taxes but the citizens have health care? Or do you mean the countries that are not going out to start some BS war
that benefits only the war mongers who make money off of war? I call them the civilized countries. You call them bennies? They pay for them. Give me a break. It depends on whether you want to live in a society where everyone does well or only a few people do well and the rest of the country lives in poverty. The good life? Yes that is the good life.

[miriamfl]

10:51 AM on 10/16/2011

We should care because thanks to the CORPORATE GLOBALISTS that used to be American Corporation we the GREAT USA have brought the world to it's knees!!! The deregulations, lack of oversight from S&P, Moodys and the rest of the rating co. is the reason the world is bankrupt!

[John michael Adams]

10:59 AM on 10/14/2011

uh oh now this is a big one. the EFSF accounts to only a third of Spain's economy and the Eurozone fanatics have to convince the Germans to pay more... again just in order for their united states of europe utopia to happen. Well, as what Winston Churchill said, If you refuse to face reality, reality will face you. Eventually the euro fanatics will face the inevitable, unavoidable, uncontrollable course of breaking up and let countries grow by having their own currencies and monetary policies without the diktats from technocrats sitting with their increasing salaries in brussels.