SPAIN’S BORROWING costs have hit a record euro-era high following Moody’s announcement yesterday that it was downgrading Spain’s sovereign credit rating by three notches.
The downgrade comes just days after the Spanish government reached a deal to borrow €100bn to support its debt-laden banking system and it leaves Spain’s sovereign credit rating at just one notch above ‘junk’ status.
Moody’s said that the agreed loan will increase Spain’s debt burden and it also cited continued weakness in the Spanish economy as being behind the downgrade. The agency said that while details of the aid package have yet to be released, “responsibility for supporting Spanish banks rests with the Spanish government”.
Spain’s 10-year bond yields hit 7 per cent this morning – the figure which saw Ireland, Greece and Portugal all seek an EU/IMF bailout.
Madrid has pressed to distance the aid secured for Spain’s banks from the loan packages agreed for Greece, Ireland and Portugal, saying that no new austerity will be imposed on the public sector as a result of the loan.