A recent press release said that Standard and Poor credit rating has cut Spain’s credit rating from AA to AA- informing the euro briefly about the challenges for the European Major Powers as the G20 countries meet to discuss about the euro zone debt crisis.
Fitch credit rating has already downgraded Spain followed by Standard and Poor which justifies that there is high unemployment, tightening credit and high private sector debt and these cause the nation’s rate to go down from AA to AA-.
Spanish 10 year government bond yields have risen slightly and though it remained 60 basis points below that of Italy at 5.24 per cent which is at some distance from the 7 per cent level seems to be unsustainable.
According to S & P, though the economic performance resumed during 2011 yet there are high unemployment, tightening financial conditions, increased level of private sector debt and economic slowdown in Spain’s main trading partners.
In a statement Spain’s treasury said to its investors that S & P has underestimated the scope of the unprecedented structural reforms undertaken which would naturally take time to bear fruit.
According to a senior Spanish official, it would be difficult to meet 6 per cent fiscal deficit and if the deficit goes beyond to 6.5 per cent it would be worrying.