The downgrade reflects the view of mounting risks to Spain's net general government debt as a share of GDP in light of the contracting economy.
In particular, the downgrade reflects:
-
the deterioration in the budget deficit trajectory for 2011-2015, in contrast with S&P's previous projections, and
-
the increasing likelihood that the government will need to provide further fiscal support to the banking sector.
Consequently, S&P is of the opinion that risks are rising to fiscal performance and flexibility, and to the sovereign debt burden, particularly in light of the increased contingent liabilities that could materialise on the government's balance sheet.
S&P believes that the Kingdom of Spain's budget trajectory will likely deteriorate against a background of economic contraction in contrast with the previous projections.
At the same time, S&P sees an increasing likelihood that Spain's government will need to provide further fiscal support to the banking sector. As a consequence, S&P believes there are heightened risks that Spain's net general government debt could rise further.
The negative outlook on the long-term rating reflects S&P‘s view of the significant risks to Spain's economic growth and budgetary performance, and the impact that is believed this will likely have on the sovereign's creditworthiness.
The transfer and convertibility (T&C) assessment for Spain, as for all European Economic and Monetary Union (EMU or eurozone) members, is 'AAA', reflecting Standard & Poor's view that the likelihood of the European Central Bank (ECB) restricting non-sovereign access to foreign currency needed for debt service of non-euro obligations is low. This reflects the full and open access to foreign currency that holders of euro currently enjoy and which we expect to remain the case in the foreseeable future.
Press release
© S&P - Standard and Poor
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article