Monday

25th Jul 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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.

EU to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event Agenda for 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels