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Moody’s downgrade Spanish debt to Aa1

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by Kay Mitchell
Moody's downgrade Spanish debt to Aa1

Credit rating agency Moody’s has downgraded Spain’s credit rating today - just a day after unions held a general strike to protest against tough austerity measures.

Like many other euro zone nations, Spain has introduced austerity measures, aimed at cutting its budget deficit, which is currently 11% of GDP.

Spain aims to reduce the deficit to 6% by 2011.

Moody’s has cut Spanish debt from Aaa to Aa1, with a stable outlook, and the downgrade follows similar moves by Fitch and Standard & Poor’s in May.

Explaining the downgrade, Moody’s lead analyst for Spain, Kathrin Muehlbronner, said: “One of the key drivers for Moody’s decision to downgrade Spain’s rating to Aa1 is its weak growth prospects and the challenge that this presents for fiscal consolidation.”

She added: “Although Moody’s expects the government to broadly achieve its fiscal targets both this year and next, a further reduction in the deficit beyond 2011 is likely to require more fundamental spending reforms than the government has so far tabled.”

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News posted: September 30, 2010

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