Friday

24th Feb 2017

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.

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. WTO says Russian pork ban was illegal
  2. Belgian nuclear plant made 'significant progress' on safety
  3. Report: Commission gauging EU support for Poland sanctions
  4. Irish PM expected to quit amid police scandal
  5. After Brexit vote, 100,000 UK firms registered in Ireland
  6. Bayrou to support Macron in French presidential election
  7. British by-election tests Ukip strength after Brexit
  8. Romanian parliament buries controversial corruption decree

Stakeholders' Highlights

  1. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  2. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  3. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  4. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  5. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  6. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  7. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  8. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  9. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  10. Centre Maurits CoppietersMinorities and Migrations
  11. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  12. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year

Latest News

  1. Don't blame Trump for Europe's insecurity
  2. EU rules out post-Brexit 'hard border' with Northern Ireland
  3. Fewer EU pupils being taught two foreign languages
  4. Women and child refugees face abuse in French camp
  5. Russian military creates 'information force'
  6. Spain MPs to probe €60bn bank bailouts
  7. Crowded race to win EU medicines agency
  8. Fighting environmental injustice in Europe