Moody’s downgrades rating on five Spanish regions

The rating agency Moody’s on Thursday said it had downgraded the credit standing of five regional governments in Spain a day after warning it could lower its rating on Spanish sovereign debt because of weak growth prospects.

Moody’s downgraded from Aa1 to Aa2 the rating for four regions, and from Aa2 to Aa3 for a fifth.

The agency also said that the outlook for all of these regions remained negative.

It explained its decision by saying that an expected fall in tax revenues in 2010-2011 would have a recurrent effect on their deficits in coming years.

This trend, together with a high level of debt, would be difficult to reverse given the weak level of expected growth in coming years.