Thursday, March 10, 2011

Moody’s Downgrades Spain's Credit Rating

 Moody's has cut Spain's credit rating by one notch to Aa2, two ranks below the top level.

Moody’s stated that the cost to the Spanish state of recapitalising the country’s banking system would be greater than the government estimate of €20bn, and above the rating agency’s own earlier estimate of €17bn. The new Moody’s prediction is that Spain will require an extra €40-€50bn, rising to €110-€120bn in a “stressed” situation.

Given that it appears the European Central Bank is about to begin a round of interest rate hikes, a "stressed" situation for Spain is very likely possibility.

Moody’s credit rating for Spain remains on a “negative” outlook.

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