The agency Standard & Poor’s downgrades the debt rating of Spain

The agency Standard & Poor’s downgrades the debt rating of Spain

  • It leaves open the possibility of new cuts in the medium term.
  • He has lowered it to ‘AA’.
  • The decision comes a few days after the ratings agency cut the Greek and Portuguese debt.
  • De la Vega sends a message of tranquility to citizens and markets.
  • He believes that the Spanish debt continues to maintain an “excellent note”.
Deuda griega

Vestibule of the Athens stock exchange. Orestis Panagiotou / EFE

The credit rating agency Standard & Poor’s downgraded the rating of long-term Spanish debt to ‘AA’ from ‘AA +’ on Wednesday, with a negative outlook, which leaves open the possibility of further cuts in the medium-term note. The reductions caused the collapse on Tuesday of the world stock markets

The decision comes a day after the risk rating agency cut the Greek debt rating to the category of junk bonds and Portugal’s debt in two steps, up to ‘A-‘ from ‘A +’, with a “negative” outlook ” in both cases.

These reductions caused the collapse of world stock markets on Tuesday , including Spain, which suffered its second biggest fall of the year. This Wednesday, the decision to downgrade the debt of Spain was known shortly before the closure of the Spanish market, which ended with losses of 3% .

 

Thus, the markets have been affected by the uncertainty about financial aid to Greece, which needs up to 120,000 million euros to avoid bankruptcy, as it was known this Wednesday.

Differences with Greece and Portugal

However, despite the reduction, Standard & Poor’s explained that the Spanish debt continues to maintain an “excellent note” that reflects the “strong capacity” of the country to meet its financial commitments. The analyst in charge of Spain Marko Mrsnik stressed that, although Spain, Greece and Portugal share their belonging to the euro zone, there are “fundamental differences” between them, given that in the case of Spain the default rate “is zero” and for the moment It has not changed. The Spanish economy “must change a model of growth driven by credit

S & P considers that the Spanish Executive will comply with its budgetary objective for 2010 , but it is more difficult to achieve the reduction of the public deficit for 2013, because the period of low economic growth will be longer than expected, which will be added an increase in interest rates.

However, the agency “sees no risk” so that Spain can capture in international markets the financing necessary to cover the state debt, which amounts to 80,000 million euros for 2010. According to the analyst, the reduction responds to the change in opinion on the Spanish economy, which “must change a growth model driven by credit”. The lower availability of credit will affect GDP growth, so the economic reactivation will necessarily go through the “deleveraging” of the private sector.

Call to responsibility

For its part, the European Commission appealed to international risk rating agencies to behave in a “rigorous and responsible” manner , in relation to the evolution of the Greek crisis. Brussels tries to make sure that these analysts do not incur conflicts of interest

The EU executive “closely monitors the behavior of the financial market and its main actors during this crisis,” said the spokesman for economic and monetary affairs, Amadeu Altafaj. Shortly thereafter, Community spokesperson for Internal Market and Services, Chantal Hughes, recalled that the EC has already taken measures to establish within the Union a new regulatory framework for rating agencies, whose role throughout the international financial crisis It has been very criticized .

Brussels tries to ensure, among other objectives, that these analysts and consultants do not incur conflicts of interest, use correct and transparent evaluation methods, and act responsibly. “It is not up to the European Commission,” said the spokesperson, “to say if the rating given by one or another agency is correct or not “. The Commission “will remain vigilant,” stressed the spokeswoman for Commissioner Michel Barnier.

Reactions

The first vice president of the Government, Maria Teresa Fernandez De la Vega, launched, after hearing the news, a “message of tranquility to citizens and confidence in the markets.” De la Vega declared from the Congress that Spain is ready to assume its commitments and that the Government has a serious plan of fiscal consolidation and reduction of the deficit. Campa assured that S & P “does not stop being an agent of the market that issues an opinion”

The Secretary of State for the Economy, José Manuel Campa, was surprised by the reduction and foresaw that the impact he probably has on the financial markets will be “limited” . In addition, he assured that S & P “does not stop being an agent of the market that issues an opinion”, which, he said, is “out” of the estimates recently issued by other analysts and international organizations.

For his part, the Portuguese Prime Minister, José Sócrates, came out on Wednesday in defense of Portugal’s “international credibility” and stressed that the country fulfills the commitments.

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