Spain had its credit rating cut one level by Standard & Poor’s as rising defaults threaten efforts to stem Europe's sovereign-debt crisis and limit risks for the region's banks.
The ranking slid to AA-, with a negative outlook, in the third reduction by S&P in three years. The ratings company announced the change in a statement.
“Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain’s growth prospects,” S&P said in the statement. “The financial profile of the Spanish banking system will, in our opinion, weaken further, with the stock of problematic assets rising further.”
Spain is paying yields of more than 5 percent on its 10- year bonds even after the European Central Bank stepped in to prop up its bond market on Aug. 8. The gap between Spanish and German 10-year borrowing costs was 310 basis points yesterday, compared with 325 basis points on Sept. 30.
The euro declined for a second day against the dollar and yen after the ratings cut. The common currency declined 0.3 percent to $1.3743 as of 8:20 a.m. in Tokyo and fell 0.2 percent to 105.73 yen.
U.S. Downgrade
The decision comes two months after S&P stripped the U.S. of its AAA credit rating for the first time. While the Aug. 5 move roiled global markets, bond investors ignored S&P’s warnings about U.S. creditworthiness and piled into Treasuries. The yield on the benchmark U.S. government bond fell to a record 1.6714 on Sept. 23.
The reduction of Spain’s rating also comes after Moody’s Investors Service on Oct. 4 warned “all but the strongest euro- area sovereigns” that they are likely to see further downgrades, as it cut Italy’s debt for the first time in almost two decades. Moody’s said that the increased funding risks caused by fallout from the region’s debt crisis meant that “all but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings.”
General Election
Spain’s Socialist government, which faces a general election on Nov. 20, has said the country may miss its 2011 growth forecast of 1.3 percent as the recovery slows. Unemployment rose in August to a record 21.2 percent and the manufacturing industry contracted the most in more than two years in September. Regional governments, which are responsible for health and education and hire half of Spain’s public workers, are behind schedule to meet deficit targets, preliminary data showed Sept. 8.
The People’s Party, which polls indicate may win an outright majority in the vote, has pledged a stricter budget law, spending limits for regional governments, and tax breaks to encourage companies to hire workers and become more competitive. PP leader Mariano Rajoy said on Sept. 15 he would send a “strong signal” to markets and wouldn’t deviate from the budget-deficit goal of 4.4 percent of gross domestic product in 2012 “under any circumstances.”
Still, the PP voted against Zapatero’s measures to cut public wages and freeze pensions, and has pledged to bring pensions “up to date” if it wins the election. Zapatero’s austerity measures aim to slash the shortfall to 6 percent of GDP this year from 11 percent in 2009. The government forecasts the debt burden will grow to 67 percent this year, almost twice the 36-percent level in 2007.
To contact the reporter on this story: Emma Ross-Thomas in Madrid aterossthomas@bloomberg.net
To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Stephanie Phang at sphang@bloomberg.net
댓글 없음:
댓글 쓰기