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Moody’s warns of Spanish downgrade

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by Kay Mitchell

Credit rating agency Moody’s has today warned it has put Spain on review for a possible downgrade.

The latest warning suggests last week’s second bailout for debt-laden Greece has done little to allay fears of the debt crisis spreading.

Moody’s said it could downgrade Spain’s current Aa2 grade by one notch to Aa3, while adding that half a dozen Spanish banks could have their credit ratings downgraded.

The warning from Moody’s comes as the Spanish Government is pressing ahead with a deficit reduction plan.

There have been fears that Spain, which is the euro zone’s fifth largest economy, could be forced to seek a bailout, like Greece, Ireland and Portugal.

Spain’s borrowing costs have risen as fears continue to grow over the debt crisis in the euro zone.

Meanwhile, Spain continues to struggle with an unemployment rate of more than 20% - the highest - more than double the euro zone average and the highest rate in the industrialised world.

The country has been hit by a severe slump within its key construction industry, which has led to a significant amount of job losses.

To help bring down the unemployment rate, the Spanish government is continuing to change the country’s labour laws.

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News posted: July 29, 2011

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