The rating agency Standard & Poor’s (S&P) downgraded today by two notches the note that gives the sovereign debt of Spain until it is in “BBB +” or approved high, with a negative outlook, which he attributed to the volume of debt of the country while its economy shrinks.
“We think that the dangers are increasing in relation to their tax position and flexibility, as well as sovereign debt burden, particularly in light of increased contingent liabilities that may materialize in the balance sheets of the government,” said the rating on a statement.
S & P argued that degradation from the note “A” or notable enjoyed by Spain until now, the deterioration of the path of country’s budget deficit and increasing the likelihood that the government needs to provide greater tax incentives to the sector banking.
Due to the reduction of the note on its sovereign debt, the risk measurement agency has also revised downward projections bBruto domestic product (GDP) Spanish, as now expected to contract 1.5% this year and 0.5% the next.
“The Spanish economy is rebalancing and the measures taken by the Government should facilitate this process,” said S & P.
However, he warned that “the Spanish commercial banking system has sharply increased their reliance on official sources of funding to a level considerably higher than anticipated in January.”
That was the month that the U.S. rating agency last applied a discount to the note by the Spanish sovereign, when also downgraded by two notches, from “AA-” to “A”, and attributed to increased euro zone crisis and rising costs of private sector funding.
S & P noted that the Spanish prime minister, Mariano Rajoy, announced in March that the public deficit target this year in Spain will reach 5.8% of GDP compared to 4.4% that was expected and said it is “unlikely to achieve these goals because of the economic and financial environment.”
The rating agency also added that “due to increased risks to economic recovery Spanish, we have also seen a downward stage, if any, could lead to lower your score again.”
As it has in the past, S & P said that Europe’s strategy for resolving the debt crisis “lacks effectiveness,” but said that the new Spanish government has implemented “a comprehensive package of structural reforms that should support growth in the long term. “
Category: Personal Finance