Standard & Poor’s cut Spain’s long-term credit rating by one notch to “AA-”, from double A rating, on renewed concerns of Spain’s banking system and growing challenges for the country’s private sector in seeking fresh external financing.
With this downgrade of Spain, the euro zone’s fourth largest economy (while Italy is third largest economy) has been rated three notches lower than the coveted triple A rating. It needs to be said that last week Fitch Ratings had downgraded Spain’s creditworthiness by two notches to AA-, from AA rating, mired by the region’s fiscal slippage and strained euro zone crisis.
Further, Spain’s financial institutions have seen rise in troubled assets from weakness in the broader economy, high financing costs and heavy private sector debt load. Moreover, even rating agency Moody’s has warned Spain of a downgrade, if financials does not improve.