MADRID (AP) – Ratings agency Moody’s on Wednesday warned it may downgrade Spain’s debt because the government is vulnerable to a borrowing crunch next year, when the recapitalization of weak banks could prove more costly than expected for public finances.
The agency, which lowered Spain’s rating from Aaa to Aa1 in September, says it will review the rating again because of high financing needs in 2011 but does not expect the country to need a bailout.
The government’s bond yields have risen to high levels in recent weeks amid Europe-wide debt market turmoil. Investors fear that countries like Spain or Portugal will have trouble handling heavy debt loads and require emergency help, like Greece or Ireland.
Spain is considered a risk because it is still struggling to emerge from nearly two years of recession, has the highest unemployment rate in the eurozone and a swollen deficit.
Who could have seen that coming?
The debt crisis in Europe is really causing big problems to the whole Union. Really countries like Portugal, Greece and Ireland should pay more attention to their finances and their fiscal policy.