The limited supply of dollars, which can not sustain the previously distorted international capital structure, continues to impact sovereign nations. The very real possibility of default by these nations exists because they have given up the one method that could assure them of escaping default. That is, by becoming members of multi-country financial unions, namely the EU and the UAE, they no longer have the power to print their own money to inflate themselves out of their current predicaments.
Shares in Spain fell sharply on Wednesday after Standard & Poor's revised down its outlook on the country to negative from stable, saying it now expects a longer and deeper downturn there, just two days after warning Greece and Portugal over their own fiscal problems.
S&P affirmed 'AA+' long-term and 'A-1+' short-term sovereign credit ratings, but said the situation in Spain appears to be worse than they thought in January when long-term debt lost its AAA rating.
The announcement resulted in a drop in the Ibex 35 index of Spanish companies. It dropped more than 200 points as the news was announced. The market was down 2.4% in afternoon trading with major banks Santander down 3.52%/quotes/comstock/13*!std/quotes/nls/std (STD 16.44, -0.60, -3.52%) and BBVA down 3.50%.
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