S&P downgrades Spain: Contagion fears grow

[Joanne98]

(RTTNews) - Spain has had its long-term sovereign debt rating downgraded to AA from AA+ by ratings agency Standard & Poor's, as fears continue to grow over contagion effects from the Greek debt crisis.

The agency said Spain faced a deeper deterioration in public finances and a longer period of economic weakness than it had previously expected. The news rattled European markets, which were already unsettled by Tuesday's downgrade of both Greece and Portugal.

"We now believe that the Spanish economy's shift from a credit-fueled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," S&P credit analyst Marko Mrsnik said in a statement.

Spain is still in recession and the government has launched a massive public works program to keep unemployment down. "Our conclusion is that challenging medium-term economic conditions will further pressure Spain's public finances, and additional measures are likely to be needed to underpin the government's fiscal consolidation strategy and planned program of structural reforms," S&P said.

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