Standard & Poor’s cut Spain’s long-term sovereign credit rating for the second time this year, Dow Jones Newswires reported. It dropped Spain’s rating to BBB+ from A. The outlook on the long-term rating is negative, S&P said in a statement.
In January, S&P cut Spain's credit rating by two notches amidst downgrades of several euro-zone countries.
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The New York-based ratings agency said it was concerned that the Spanish government might be forced to provide more fiscal support to the banking sector, Bloomberg Businessweek reported.
“Spain’s budget trajectory will likely deteriorate against a background of economic contraction,” S&P wrote in a statement, according to Bloomberg Businessweek. “At the same time, we see an increasing likelihood that Spain’s government will need to provide further fiscal support to the banking sector. As a consequence, we believe there are heightened risks that Spain’s net general govern debt could rise further.”
Spain’s debt is expected to reach 84 percent of GDP next year, up from 40 percent in 2008, according to Bloomberg Businessweek.
One bright spot: S&P said it believed the set of structural reforms Spain’s new government has been implementing – which include the biggest budget cuts in 30 years – should support economic growth over the longer term, Dow Jones Newswires reported. The agency said it did not see Spain’s labor reforms creating net employment in the short term, however.
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