Moody’s expected to strip Spain of top credit rating

SPAIN is expected to loose its triple-A credit rating by the end of this week after a three-month review of the country’s finances by ratings agency Moody’s.

The ratings agency put Spain’s debt on review for a possible downgrade at the end of June saying it would decide whether to downgrade the country’s rating after three months.

At the time it said it would take Spain several years to recover from the collapse of its property market and that GDP growth was likely to be no higher than one per cent between 2010 and 2014.

At the end of July Moody’s senior credit officer Steven Hess warned the country would probably lose its top credit rating.

Most analysts expect Moody’s to downgrade Spain’s credit rating by one or two grades to either Aa1 or Aa2.

Lowering Spain’s credit rating by one grade would put it in line with Fitch Ratings’ AA+ classification. A two-grade reduction would equal Standard & Poor’s rating of the country.

Spain’s economy grew just 0.2 per cent in the second quarter of 2010 and 0.1 per cent in the first quarter as unemployment stayed above 20 per cent, the highest in the Eurozone. The economy is expected to shrink 0.4 per cent this year.

The news came as Spain faced a general strike yesterday over austerity measures. There were protests in 11 European capitals to oppose measures such as spending cuts and pension and labour market reforms.