S&P Cuts Spain's Outlook

Discussion in 'Wall St. News' started by S2007S, Dec 9, 2009.

  1. S2007S


    S&P Cuts Spain's Outlook


    Standard & Poor's Ratings Services lowered its outlook on Spain to "negative," saying the country will likely see "significantly lower" gross-domestic-product growth.

    Its long-term ratings are one notch below triple-A and the outlook change comes as Spain deals with surging unemployment following the recession. It was 19.3% in October, the second highest in the European Union behihd Latvia.

    Formerly an engine of euro-zone job creation and economic growth, Spain last year suffered an abrupt reversal of fortune when the global financial crisis precipitated the collapse of the country's formerly buoyant construction industry. Though the wider euro zone returned to growth in the third quarter, the Spanish economy continued to contract. Spanish officials have said they expect Spain to return to growth in the first quarter.

    In addition, S&P on Wednesday noted Spain's "persistently high fiscal deficits relative to peers" in the absence of policy that emphasizes medium-term growth.

    "Compared to its rated peers, we believe that Spain faces a prolonged period of below-par economic performance, with trend [gross-domestic-product] growth below 1% annually, due to high private sector indebtedness and an inflexible labor market," S&P added.

    The ratings agency said a downgrade could come in the next two years if authorities don't take action to tackle fiscal and external imbalances. "If the government announces concrete fiscal measures that we believe could credibly achieve annual primary surpluses of 2% or higher by the end of the forecast period in 2012, downward pressure on the ratings may abate," said analyst Trevor Cullinan.
  2. When Spain goes bust they can always collateralize their debt with some good Iberian ham:



  3. kaciara


    greece spain.. next one?
  4. Who gives a fuck about what ratings agencies say. They are useless. They tell us exactly what we already know, usually after we already know it.

    I hope nobody here makes the mistake of relying on them for guidance. The mess of 2008 exposed them for what they are - useless.
  5. Well, if I am a govt bond investor, who else should I rely on for guidance?

    In my experience, the ratings agencies do a solid job where sovereigns are concerned. I don't have too many complaints. Moreover, one important aspect is that the CBs (e.g. the ECB and the BoE) rely on the ratings agencies for assessment of collateral quality. Regardless of whether it's good or bad, it means that ratings are very significant.