Spain's PM rejects agency's gloomy ratings forecast

11th December 2009, Comments 0 comments

Zapatero rejects pessimistic forecasts by the Standard and Poor's ratings agency and stresses that Spanish treasury is being financed in a normal way.

Madrid – Spanish Prime Minister Jose Luis Rodriguez Zapatero rejected on Thursday pessimistic forecasts by the Standard and Poor's ratings agency, which has lowered Spain's credit rating.

"Let's be clear. The Spanish treasury is being financed in a completely normal way," he said, referring to demand for the government's sovereign debt bonds and the interest it has to pay.

"Two or three ratings agencies have confirmed the maximum grade for our debt, a grade that our government shares," he said in a speech, referring to the Fitch and Moody's international ratings agencies.

He was responding to an announcement on Wednesday by the Standard and Poor's agency which lowered Spain's credit rating to "negative" from "stable".

"Compared to its rated peers, we believe that Spain faces a prolonged period of below-par economic performance, with trend GDP growth below 1.0 percent annually, due to high private sector indebtedness and an inflexible labour market," said the agency in a statement.

It said a downgrade could come in the next two years if the authorities do not take "more aggressive actions" to tackle fiscal and external imbalances.

That came after a day after Fitch downgraded the sovereign debt of another EU member, Greece.

The spectre of a similar scenario in Spain pushed the Madrid stock market down 2.27 percent. The market was calmer on Thursday, gaining 0.30 percent by early afternoon.

Zapatero however Thursday predicted a recovery from the crisis was "imminent".

In January Standard and Poor's lowered its long term credit rating for Spain by one notch to AA-plus from AAA.

AAA is the highest possible rating, while AA-plus indicates that Spain has a very strong capacity to repay its borrowings, according to Standard and Poor's scale.

Ratings agencies are used in financial markets to measure the risks of a default by a borrower.

AFP / Expatica

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