LONDON: Moody's Investors Service has downgraded Spain's government bond ratings by one notch to Aa2 from Aa1 as it expects the eventual cost of bank restructuring will exceed the government's current assumptions, leading to a further increase in the public debt ratio.
It said on Thursday, March 10 it was also concerned over the government's ability to achieve the required sustainable and structural improvement in general government finances.
The international ratings agency said the central government had limited control over the regional governments' finances as well as the background of only moderate economic growth in the short to medium term.
Moody's also said it had assigned a negative outlook to the rating as the risks to Spain's government finances remain skewed to the downside.
'Spain's vulnerability to market disruption remains elevated given the high funding requirements, not only for the sovereign but also for the regional governments and the banks,' it said.
It said Spain's country ceilings for bonds and bank deposits were unaffected by Thursday's rating action and remained at Aaa (in line with the Eurozone's rating). Spain's P-1 short-term rating was unaffected by the rating action.
It said on Thursday, March 10 it was also concerned over the government's ability to achieve the required sustainable and structural improvement in general government finances.
The international ratings agency said the central government had limited control over the regional governments' finances as well as the background of only moderate economic growth in the short to medium term.
Moody's also said it had assigned a negative outlook to the rating as the risks to Spain's government finances remain skewed to the downside.
'Spain's vulnerability to market disruption remains elevated given the high funding requirements, not only for the sovereign but also for the regional governments and the banks,' it said.
It said Spain's country ceilings for bonds and bank deposits were unaffected by Thursday's rating action and remained at Aaa (in line with the Eurozone's rating). Spain's P-1 short-term rating was unaffected by the rating action.
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