Moody’s Spain

Today the risk assessment agency, Moody’s, announced that it has decided to lower Spain’s rating with regards to its national debt from Aa1 to Aa2 with a negative outlook.

Last December Moody’s gave Spain the highest rating possible but said that it would review its position in three months time. Now three months on it has decided to lower Spain’s rating. Added to this is the negative outlook for the foreseeable future. Moody’s has justified its actions saying that it fears that the restructuring of the financial system will cost the government more than it had originally planned for and will increase Spain’s debt.

The Vice president Elena Salgado has criticised Moody’s saying that the agency should have waited until this afternoon when the Bank of Spain is scheduled to publish the costs of the restructuring of the financial system.

Moody’s has highlighted the lack of control that central government has on regional building societies and the forecasts of weak growth both of which it believes are factors that will prevent the government meeting its commitments to reduce Spain’s budget deficit.

Salgado publicly disagreed with Moody’s actions and said that the doubts that this agency had over Spain’s capacity to deal with its budget deficit would have been resolved if it had simply waited until this afternoon when the Bank of Spain will confirm the costs of restructuring Spain’s financial system. However, she did admit that the agency was justified in worrying about the budget deficit of Spain’s autonomous regions.

She is quoted as saying that ‘we need to make more of an effort to redirect this deficit, we need to control it and the autonomous regions need to deal with it’.

In answer to criticism from the PP she said that the government has always counted on its support in the restructuring of the financial system given that it was the result of ‘shared errors’.