Spain downgraded

Moody’s downgrades Spain's credit rating by two notches.

Rating agency Moody's has followed the lead of rival firms Standard and Poor's and Fitch Ratings set earlier this week, by downgrading Spain's credit rating. Moody's, however, has reduced Spain's credit rating two notches, one place further than both Standard and Poor's and Fitch, from class A to Aa2.

Moody's justified its decision stated that "no credible resolution of the current sovereign debt crises has emerged". Spain's downgrade follows similar action taken by the agency in both Belgium and Italy.

A spokesman for Moody's said,

Spain's large sovereign borrowing needs as well as the high external indebtedness of the Spanish banking and corporate sectors render it vulnerable to further funding stress."

Moody's now expects Spain's real GDP growth in 2012 to be 1 per cent at best, compared with earlier expectations of 1.8 per cent

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