S&P cuts Spain ratings two notches to BBB-plus

NEW YORK Thu Apr 26, 2012 6:41pm EDT

NEW YORK (Reuters) - Standard & Poor's on Thursday cut its credit rating on Spain to BBB-plus from A, a two-notch downgrade, citing its expectation the government's budget deficit will deteriorate even more than previously thought due to economic contraction.

The ratings agency put a negative outlook on the credit and said it believes the government will also have to provide more financial support for the euro zone nation's banking sector.

Moody's Investors Service rates Spain one notch higher at A3 with a negative outlook, and Fitch Ratings has it two notches higher at A, also with a negative outlook.

"We think risks are rising to fiscal performance and flexibility, and to the sovereign debt burden, particularly in light of the increased contingent liabilities that could materialize on the government's balance sheet," S&P said in a statement.

(Reporting By Daniel Bases, Burton Frierson, and Pam Niimi; Editing by Leslie Adler and Dan Grebler)

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