Standard & Poor's yesterday downgraded its long-term debt rating on Spain to "AA-" from "AA," citing the country's weak growth prospects and risks facing its banks. The Spanish economy is burdened by high unemployment, tight credit, heavy private-sector debt loads, and prospects that its main trading partners will also stumble, S&P said in a statement.
"Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects," it said. Spain's banking system will also likely weaken further as the pile of troubled assets rises, S&P said. The outlook on the rating is "negative," which implies it could be lowered again at some point. But S&P affirmed its short-term rating of "A-1+" on Spain. Moody's has also warned it could soon downgrade Spain.