Moody’s warns of downgrade risk to Spain’s rating

Moody's Investors Service downgraded Spain's credit rating yesterday and warned that France's rating could also be at risk, citing both nations' vulnerability as Europe continued to struggle to manage its persistent debt crisis.

After cutting Spain's rating by two notches, Moody's said that since it began reviewing the nation's ratings in July, no resolution had emerged to the nation's debt crisis and that worsening outlooks for global and European growth were hurting growth prospects for Spain, the Associated Press reported.

The country would find it difficult to achieve its targets for reduction of its budget deficit.

The Moody's downgrade comes four days after Standard & Poor's cutting Spain's long-term debt rating, AP said. Spain's rating was downgraded by Fitch Ratings on Friday.

Moody's said that even if a solution to Europe's crisis was reached, it would take time for a full restoration in the nation's political cohesion and growth prospects according to AP.

The ratings agency said, in the meantime, Spain's large sovereign borrowing needs, as also the high external indebtedness of the Spanish banking and corporate sectors, rendered it vulnerable to further funding stress.