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Global Stocks Mixed After S&P Cuts Spain Credit Rating to Near Junk

2012-10-11 64 Dailymotion

<p>Moody’s has promised to announce the results of a review of Spain’s finances for a possible downgrade this month.<br /><br />Standard & Poor's cut Spain's sovereign credit rating to BBB-minus, just above junk territory, on Wednesday, citing a deepening economic recession that is limiting the government's policy options.</p><br /><p>The S&P downgrade comes with a negative outlook reflecting the credit ratings agency's view that there are significant risks to economic growth and budgetary performance, plus a lack of clear direction in euro zone policies.</p><br /><p>The country has been in recession since earlier this year, its second economic contraction in just a few years, and unemployment hit 25 percent with a return to job creation still two years away.</p><br /><p>Falling tax revenue and rising costs of unemployment benefits are confounding the government's efforts to hit a 2012 deficit reduction target of 6.3 percent of gross domestic target agreed with the European Union.</p><br /><p>Both the International Monetary Fund and Spain's own Central Bank have cast doubt on the savings envisioned in Prime Minister Mariano Rajoy's 2013 budget, saying they are based on a too-rosy outlook for the economy.</p><br /><p>Rajoy's center-right People's Party has an absolute majority in parliament and so far has been able to pass spending cuts and economic reforms without any problem.</p><br /><p>However, street protests have increased in recent months as Spaniards revolt against huge public bailouts for the country's crippled banks, while social benefits are cut.</p><br /><p>S&P's two-notch downgrade from BBB-plus brings it in line with Moody's Investors Service's rating. Both firms have Spain just on the cusp of junk status, and Moody's has Spain also on review for a possible downgrade.</p>

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