Moody's Cuts Spain Debt Ahead of Central Bank Presentation
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Moody's Investors Service Inc. reported Thursday that it has cut government debt in Spain to Aa2 with a negative outlook from a prior rating of Aa1, which has caused sharp declines in the euro and European bond prices in European trading.
The costs of bank restructuring and slow economic growth could lead to further downgrades according to Moody's, which said that the improvements to the Spanish economy could be limited.
"The eventual cost of bank restructuring will exceed the government's current assumptions, leading to a further increase in the public debt ratio," the ratings agency said.
Moody's added that the ability of the Spanish government to generate sustainable and structural improvement in general finances due to the limited control over the spending of regional government.
The euro lost 0.5 percent against the Swiss franc and the dollar, hitting a low of 1.2882 Swiss francs and $1.3804.
Soledad Nunez, head of Spain's debt agency, was surprised about the move from Moody's, which had the debt in Spain under negative watch. Nunez was not understanding of why Moody's went ahead with the downgrade ahead of the Bank of Spain presenting details on its estimates on bank recapitalization needs.
"They could have waited to see what rationale the Bank of Spain has for its estimates," Nunez said.
The costs of bank restructuring and slow economic growth could lead to further downgrades according to Moody's, which said that the improvements to the Spanish economy could be limited.
"The eventual cost of bank restructuring will exceed the government's current assumptions, leading to a further increase in the public debt ratio," the ratings agency said.
Moody's added that the ability of the Spanish government to generate sustainable and structural improvement in general finances due to the limited control over the spending of regional government.
The euro lost 0.5 percent against the Swiss franc and the dollar, hitting a low of 1.2882 Swiss francs and $1.3804.
Soledad Nunez, head of Spain's debt agency, was surprised about the move from Moody's, which had the debt in Spain under negative watch. Nunez was not understanding of why Moody's went ahead with the downgrade ahead of the Bank of Spain presenting details on its estimates on bank recapitalization needs.
"They could have waited to see what rationale the Bank of Spain has for its estimates," Nunez said.
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