Spain Downgraded by S&P
January 19th, 2009Via: Bloomberg:
Spain had its AAA sovereign credit rating removed by Standard & Poor’s in the second downgrade of a euro-region government in five days, as the country’s first recession in 15 years swelled the budget deficit.
The risk of losses on Spanish government debt rose to a record today, credit-default swaps showed, after S&P lowered the rating one step to AA+ and assigned it a “stable” outlook. It was S&P’s first reduction in Spain’s rating and puts it on the same level as Belgium and Hong Kong.
The cost of economic stimulus packages and bank bailouts is boosting budget deficits around the euro-region, fueling concern governments will have difficulty paying their debt. S&P cut Greece’s rating one step to A- on Jan. 14. A day earlier, it threatened to downgrade Portugal’s debt. S&P also reduced the outlook on Ireland’s rating to negative from stable.
“The only country that should be able to keep its AAA rating is Germany,” said Jose Carlos Diez, chief economist in Madrid at Intermoney SA, Spain’s largest bond dealer. “There should be a question mark over the rest.”
Spain’s economy, whose growth outpaced the euro region for more than a decade, entered a recession in the second half of last year as the credit crisis deepened the collapse of a debt- fueled housing boom, sending the unemployment rate to the highest in Europe. The government has announced about 90 billion euros ($119 billion) of stimulus measures as well as steps to support banks amid a decline in tax revenue.
