S&P just downgraded Spain’s long-term rating to AA- from AA. It affirmed Spain’s short-term rating of A-1+.
The euro dipped briefly to $1.3735 on the news, but has since recovered the modest decline.
This comes two days after S&P downgraded Spain’s banking sector.
This also comes a week after Fitch downgraded its rating on Spain by two notches to AA-.
From S&P’s press release:
- Spain’s uncertain growth prospects in light of the private sector’s need to access fresh external financing to roll over high levels of external debt amid rising funding costs and a challenging external environment;
- The likelihood of a continuing deterioration in financial system asset quality as reflected in the recent revision of our Banking Industry Credit Risk Assessment score for Spain to group 4 from group 3 (see “Spain Banking Industry Country Risk Assessment Revised To Group 4 From Group 3 On Heightened Economic Risk”, published Oct. 11, 2011);
- The incomplete state of labour market reform, which we believe contributes to structurally high unemployment and which will likely remain a drag on economic recovery.