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Spain downgraded as Europe debt crisis spreads

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by Kay Mitchell
Spain downgraded as Europe debt crisis spreads

Standard & Poor’s (S&P) have today downgraded Spain’s credit rating by one notch to AA from AA+ and comes as the head of the International Monetary Fund (IMF) warned that the crisis in Greece could spread throughout Europe.

Following the news, the euro fell against the dollar to $1.3129 – a level not seen since late April 2009.

Spain’s downgrade comes just a day after S&P cut Greece’s credit rating to BB+ from BBB- amid worries that it is not able to take the necessary action in order to manage its economic crisis.

The debt-ridden economy is asking for help from fellow euro zone nations and the IMF in order to allow it to meet its debt repayments.

The downgrade hit global stock markets yesterday and today while banking shares in Greece have been hit.

Greece became the first euro zone nation to have its debt downgraded to “junk” status.

In addition, Portugal’s debt was downgraded two notches A- from A+.

Meanwhile, commenting on today’s downgrade, S&P said: “In our opinion, Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position.”

Dominique Strauss-Kahn, IMF’s managing director, has warned that the crisis in Greece could spread throughout Europe.

Speaking at a news conference after a crisis meeting with Germany’s finance minister and the president of the European Central Bank, Mr Strauss-Kahn said: “What is at stake today is the economic situation of Greece. But it’s more than that.

“We also need to restore confidence… I’m confident that the problem will be fixed. But if we don’t fix it in Greece, it may have a lot of consequences on the European Union,” he added.

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News posted: April 28, 2010

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