Standard and Poor’s downgrades Spain’s Valencia region

Standard and Poor’s downgraded the credit rating of Spain’s Valencia region by three notches to BBB-, the lowest investment grade, shortly after cutting its rating on the Canary Islands.

S&P said the Valencia rating outlook was negative, meaning it could be cut further within 90 days, citing the region’s difficulties in raising short-term funding recently.

The negative outlook was justified because of a lack of visibility on how the region can raise finance next year, it added.

On Friday, S&P cut the Canary Islands from A+ to AA-, a further danger sign for the country’s struggling public finances.

“We expect a further deterioration of the Autonomous Community of Canary Islands’ budgetary performance, resulting in a weaker liquidity position,” it said in a statement.

Spain has already imposed spending cuts on its regions in its efforts to trim the country’s deficit, which is a big worry for the financial markets that lend it money.

In the third quarter, the combined total debt of Spain’s 17 provinces came to 12.6 percent of Gross Domestic Product, up from 10.6 percent a year earlier, according to Bank of Spain figures.

Standard and Poor’s on December 5 warned Spain and 14 other eurozone members including Germany and France that they faced a possible downgrade of their sovereign debt because of strains on their finances as the economy slumped.