S&P Downgrades Spain with Negative Outlook, Junk-Bond Status Next

The Kingdom of Spain has been downgraded to BBB- from BBB+ by Standard & Poor's. The outlook is also listed as NEGATIVE. Spain is now officially almost at Junk-Bond ratings, and the outlook implies that it is almost there now or will be soon. The long-term and short-term sovereign credit ratings were lowered to BBB-/A-3 from BBB+/A-2.

As we have said before and as we will likely say again in the future ... This is not the last downgrade from any of the ratings agencies on Spain nor on any of the other PIIGS from Portugal, Italy, Ireland nor Greece. Here are some of the notes:

Deepening economic recession is limiting policy options; Rising unemployment and spending constraints intensifying discontent and adding to friction between governments; Doubt over the eurozone's commitment to bank recapitalization are destabilizing the credit outlook.

The negative outlook is based upon significant risks to Spain's growth and budget performance along with a lack of any clear direction in the eurozone policy.


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