Spain’s Debt Rating

Spain’s debt rating was lowered from BBB + from BBB- by Standard & Poor’s.  Spain will be face even harder time ahead as its budgetary performance declines and the ambivalence of the euro-zone continues.  This downgrade comes even after the country decided taking several austerity measures and stress tests on banks.

Prime Minister Mario Rajoy is thinking about a enacting a second bailout to prevent the recession to continue but seems reluctant to ask for help from the European Central Bank.

Spain’s economy will probably shrink 1.3 percent next year according to Bloomberg. The IMF said yesterday that Spain can tackle the fiscal crises by themselves and won’t lend to them. Although, the IMF will meet in Tokyo this week and things could change.

Now Spain plans to increase its debt load to 90.5 % of economic output by borrowing 207.2 billion although the current deficit is 7.4 % of gross domestic product and the future does not seem to hold any promise. This state of affairs will make it harder for business to flourish and taking loans. It is really bad time to be businessman in Spain.

In my opinion, this is a perfect example of where governed entitlement programs take you. The answer to economic growth is cutting entitlement programs not more government. Let’s hope the U.S. takes the same approach to its debt crisis.