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Double trouble after Spain rating cut

Thursday, October 11, 2012 - 02:03

Ovt. 11 - Spain's latest downgrade was partly due - says S & P - to a lack of clear direction in euro zone policies. With the IMF also calling for Spain and Greece to be given more time, is the pressure to solve the debt crisis back on Europe's police makers? Joanne Nicholson reports

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The sun may be shining in Madrid but storm clouds continue to gather over Spain's economy after yet another credit rating downgrade. This time S and P has placed Spain at triple B minus - just above junk - and Moody's is warning it could be next to cut. It all adds to the pressure on Spain to seek a bailout Peter Dixon is an economist at Commerzbank. (SOUNDBITE) (English) PETER DIXON, COMMERZBANK, SAYING: "It just adds to the general degree of uncertainty surrounding Spain and obviously the whole of the euro zone crisis and we don't appear to be any nearer any form of resolution and I think the downgrade reflects the fact that the governments, not just Spain, but across the euro zone, are failing to get to grips with the problems." It's that lack of clarity among policymakers that S&P says is one of the reasons for the downgrade. And now Germany and the IMF don't agree. The Fund, meeting in Japan this week, is urging Europe to put the brakes on deep budget cuts, and give Spain and Greece more time. Germany's Finance Minister says that would be counterproductive (SOUNDBITE) (German) GERMAN FINANCE MINISTER, WOLFGANG SCHAEUBLE SAYING: "You don't climb a high mountain by going downhill first. It only increases the distance you have to climb." That's a sentiment adhered to by many in the markets. Oliver Roth from Close Brothers Seydler Bank (SOUNDBITE) (English) HEAD TRADER CLOSE BROTHERS SEYDLER BANK AG, OLIVER ROTH, SAYING: "The wish of the IMF for the southern states of Europe is probably a very sensible one but it's not very realistic, simply because the pressure of the markets is so high that we have to find a quicker solution for these states." Spain's borrowing costs are still dangerously high. They almost topped the key 6 percent mark again on Thursday, and the recession is deepening. In Greece too unemployment has just topped 25 percent - on par with Spain When Eurogroup leaders meet next week, the pressure will be on to tackle this growing crisis. Joanne Nicholson, Reuters

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Double trouble after Spain rating cut

Thursday, October 11, 2012 - 02:03