Friday

20th Apr 2018

Spain downgraded to near junk despite cuts

  • Metro stop in Madrid: The country has been downgraded to near-junk (Photo: Olmo Calvo Rodríguez)

Standard & Poor's ratings agency on Wednesday (10 October) downgraded Spain to almost "junk" despite its fresh set of austerity measures, disproving the EU commission's view that budget cuts are "restoring credibility on the markets."

"The downgrade reflects our view of mounting risk to Spain's public finances, due to rising economic and political pressures," the ratings agency said in its note.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"The deepening economic recession is limiting the Spanish government's policy options," it added, as Madrid is trying to avoid for as long as possible having to ask for another bailout on top off the €100 billion earmarked for its banking sector.

Fresh spending cuts to the tune of €13 billion unveiled last month had been praised by the European Commission as a sign of Spain's commitment to reduce its budget deficit and restore its "credibility" on the markets.

But a deepening recession, combined with the highest unemployment rate in the EU and angry protests against the ever-growing austerity are complicating that plan.

In addition, the International Monetary Fund itself - the world's biggest lender to governments risking bankruptcy - warned earlier this week that policies based on too much austerity are wrong.

With Spain's fresh downgrade, the country will now face another spike in its borrowing costs, which had gone down in recent weeks after the European Central Bank announced a potenial bond-buying scheme.

The ratings agency also put Spain under "negative outlook," meaning further downgrades are possible in the future.

Spain's deficit for this year has been revised twice and now stands at 7.4 percent of GDP due to the banking bailout, while its government debt is likely to go beyond 90 percent of GDP next year.

Anti-austerity protests in Spain turn violent

Protesters clashed with riot police on the streets of Madrid on Tuesday, as Spain braces itself for a fresh round of spending cuts linked to a potential bailout.

Spain in wait-and-see mode as recession worsens

Spanish Prime Minister Mariano Rajoy on Tuesday said his government has not yet taken a decision on asking for European help in refinancing its debt, pending a key meeting of the European Central Bank next week.

Analysis

Spain's bailout dilemma: not if, but when and how

Markets rallied on Tuesday when two German lawmakers suggested Berlin is warming to the idea of a Spanish bailout. But the wait-and-see game in Madrid is likely to take a few weeks longer.

News in Brief

  1. Audit office: Brexit 'divorce' bill could be billions higher
  2. MEPs urge better protection for journalists
  3. Dieselgate: MEPs back greater role for EU in car approvals
  4. European parliament adopts new organic farming rules
  5. EU granted protection to half million people in 2017
  6. Report: Facebook to carve 1.5bn users out of EU privacy law
  7. Greek court ruling permits migrants to travel to mainland
  8. Commonwealth summit hopes for trade boost after Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  2. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  3. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  4. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  5. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  6. UNICEFCalls for the Protection of Children in the Gaza Strip
  7. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  8. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  9. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  10. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  11. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  12. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia

Latest News

  1. Macron and Merkel pledge euro reform
  2. Obscurity surrounds EU military fund's expert groups
  3. New EU party finance rules short circuit accountability
  4. Draghi to stay in secretive 'lobby' group
  5. Bulgaria offers lesson in tackling radical-right populists
  6. Getting secret EU trilogue documents: a case study
  7. Selmayr case scars Parliament and Commission
  8. Beyond macho: Turkish-EU ties