Europe’s debt woes remain the main focus for global economy and continue to escalate with Spain now center stage. Standard & Poor’s downgraded Spain’s sovereign rating to one level above “JUNK” reluctant to accept the nation’s assurances that they do not need bailout.
Standard & Poor’s has lowered Spain’s debt rating two levels to BBB- from BBB, just one step above “JUNK” status, and also assigned a negative outlook; S&P also lowered the short-term sovereign level to A-3 from A-2.
S&P cited the downgrade and the negative outlook to the “significant” risks to the growth outlook and budgetary discipline and also the “lack of clear direction in euro-zone policy”. S&P also said that the deepening economic downturn and lingering recession is further complicating the outlook and limiting the policy options for the government.
The rating downgrade was not expected now but places the rating from S&P in line with Moody’s and places Spain only one step away from “JUNK”.
This week the euro finance ministers also reiterated Spain’s comments and applauded the reform and said Spain is not in need of bailout, but seemingly S&P just tipped the nation one step closer to asking assistance.
The ESM is now in place and the ECB is ready to activate the OMT bond purchases and all Spain has to do is request!
The Spanish government recently unveiled its fifth austerity package in less than a year and public outrage is rising with separatism calls escalating the public crisis. Unemployment is at records high near 25% and the economy is lingering still in its recession with the banking sector already on bailout, housing market still the ailing man, and the private sector further shrinking.