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Ratings agency Moody‘s put Spain‘s Aa2 rating on review for a downgrade today because of a “weak growth environment” and the large debt pressure Spain faces (via Bloomberg).Moody’s said in a note that the last Greek bailout “has signaled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits,” and Spain, along with Italy, is most likely to suffer the effects of economic uncertainty in Europe.
Max Johnson, a broker at Currency Studios told The Guardian that “Spain’s banking sector remains in turmoil, unemployment is sky high, and its debt is out of control. Prime minister Zapatero is perennially upbeat, but the fact is he has almost no way of creating growth. Even with its second bailout, Greece is almost certain to default.”
Spain’s finance minister Elena Salgado tried to downplay the threat by Moody’s, saying that “Spain is on the right path for fiscal consolidation,” and that “this is only a revision and Moody’s won’t take action for another three months,” Bloomberg reports.
The news of a possible downgrade for Spain comes on the same day that Prime Minister Zapatero announced that early elections will be held in November.
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