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S&P Lowers Spain's Credit Rating

Danielle Tarasiuk |
October 11, 2012 | 10:02 a.m. PDT

Executive Producer


Central Bank of Spain/Creative Commons
Central Bank of Spain/Creative Commons
Spain’s financial troubles continued on Wednesday when Standard & Poor Ratings Services (S&P) downgraded the country’s debt rating from BBB+ to BBB-, just one level before junk status.

 Only two years ago, Spain was at a AAA rating grade, but now is one downgrade away from being considered as a non-investable country. 

S&P didn’t stop there—they reduced Spain’s short-term sovereign level from A-3 to A-2, and then authorized a negative outlook on the country’s long term rating.

 “The negative outlook on the long-term rating reflects our view of the significant risks to Spain’s economic growth and budgetary performance, and the lack of a clear direction in euro-zone policy,” said S&P. 

Spain is one of the weakest countries in the Euro Zone and has recently requested its fifth austerity package in less than a year. Spain also asked for $129 billion in EU aid this past June, which initially raised doubt about its creditworthiness.

Additionally, Spain plans to approach the EU for another $266 billion in aid next year, putting its total amount of debt to 91 percent of its economic output. In 2007, before the real estate boom ended, Spain’s rate was 36 percent.

The rating downgrade comes at a particularly difficult time as Spain tries to ask for more money using their government bonds as collateral, which are now reduced in value.

The entire Euro Zone is feeling Spain’s financial hardships—the euro abruptly dropped after S&P disclosed the country’s downgrade, losing previous strength against the dollar. 


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