Instant View: S&P cuts Spain ratings to AA, outlook negative

LISBON (BestGrowthStock) – Below are analysts’ comments after S&P ratings agency downgraded Spain’s ratings to AA with an negative outlook, reflecting S&P’s downward revision of Spain’s medium term economic outlook.

ANALYSTS COMMENTS

Latest comments

CARL BIRKELBACH, CHAIRMAN AND CEO OF BIRKELBACH INVESTMENT

SECURITIES IN CHICAGO

“(The announcement on Spain) is more of what the investors can continue to expect. United Europe is united only on paper. I think we’ll be dealing with this for years and I expect a further drop in the euro, though nothing disastrous.

“Government intervention continues to be the stopping point. We’ve gone through a crisis of our own and we’ve seen that governments can stand up and help. We could go through a scary period, but I expect governments will step up. This is small compared to what we faced just a year ago.”

Earlier comments

JOSEPH BRUSUELAS, PRESIDENT, BRUSUELAS ANALYTICS, STAMFORD, CONNECTICUT

“This represents a fear of fiscal problems cascading across the EU. This is not unexpected. I expect much larger aid packages for Greece and Portugal and negotiations soon to stem the broader fiscal deterioration in the EU.

“The euro is in jeopardy right now. The global investor will park their money anywhere but euro-denominated assets. This is dollar positive and could offer a strong bid at today’s auction.”

Earlier comments

TULLIA BUCCO, UNICREDIT

“The move was not surprising given the downgrades to other countries this week. But it’s not as severe as the cuts made to Greece and Portugal and still leaves Spain with a favorable AA rating. Spain is under pressure to ensure it makes serious fiscal consolidation steps in an environment of weak growth.”

WIN THIN, SENIOR CURRENCY STRATEGIST, BROWN BROTHERS HARRIMAN, NEW YORK

“Recent ratings action underscores the fact that the agencies are on the warpath and unlikely to relent anytime soon. And given that most of the peripheral countries remain overrated, the downgrade story will remain in play for most of 2010. We saw this during the Asian crisis, when the agencies got caught wrong-footed and then slashed ratings with abandon across the entire region just as the situation was deteriorating further, adding more fuel to the fire.

“To be clear, our model has been highlighting significant downgrade risk for Portugal, Ireland, Greece, and Spain since June 2009. The problems facing these peripheral countries are nothing new, and these problems are also not likely to be solved over the near-term. As such, we expect continued pressure on the bonds of the periphery, which likely will continue to weigh on the euro as well.”

Investment Research

Instant View: S&P cuts Spain ratings to AA, outlook negative