UPDATE 1-Egan-Jones cuts Spain rating further into junk
NEW YORK, Sept 27 (Reuters) - Ratings agency Egan-Jones on Thursday cut Spain's sovereign rating further into junk status, citing the country's faltering banks and struggling regional governments.
The agency cut Spain to CC from CC-plus, deep into speculative territory, for Egan-Jones' seventh downgrade of the sovereign so far this year.
"Spain will inevitably be faced with (additional payments) to support a portion (of) its banking sector and for its weaker provinces," Egan-Jones said in a statement.
Spain has been in recession since earlier this year, its second economic contraction in just a few years, and unemployment is stubbornly high at close to 25 percent with a return to job creation still two years away.
The country announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts on Thursday in what many see as an effort to pre-empt the likely conditions of an international bailout.
"The rub is whether Spain will be able to cut enough to obtain EU support (probably) and whether there will be an eventual haircut for current debtholders (probably)," the Egan-Jones statement read.
The Egan-Jones downgrade comes as markets are awaiting word on a rating review from Moody's Investors Service, which is expected to render a verdict on the country by the end of the month.
Moody's rates Spain Baa3, an investment grade rating - but only barely. Standard & Poor's rates the country BBB-plus with a negative outlook, and Fitch rates Spain BBB with a negative outlook.