By Luciana Lopez and Daniel Bases
NEW YORK, June 13 Credit ratings agency Moody's
Investors Service cut its rating on Spanish government debt on
Wednesday by three notches to Baa3 from A3, saying the newly
approved euro zone plan to help Spain's banks will increase the
country's debt burden.
Moody's, which also said it could lower Spain's rating
further, cited the Spanish government's "very limited" access to
international debt markets and the weakness of the national
The rating is on review for possible further downgrades,
which could come within the next three months, Moody's said.
"We will of course also take into account whatever the
details are that come out on the size and the terms of the
(bank) support package, and also take into account what's going
on in the wider euro zone" in weighing further downgrades, said
Kathrin Muehlbronner, a Moody's analyst in London.
That includes both Sunday's election in Greece and an
upcoming European summit at the end of the month, she said.
A spokeswoman at Spain's Economy Ministry in Madrid declined
"The Spanish economy's continued weakness makes the
government's weakening financial strength and its increased
vulnerability to a sudden stop in funding a much more serious
concern than would be the case if there was a reasonable
expectation of vigorous economic growth within the next few
years," Moody's said in a statement.
Euro zone finance ministers agreed on Saturday to lend Spain
up to 100 billion euros ($125.74 billion) to shore up its
teetering banks, and Madrid said it would specify precisely how
much it needs once independent audits are completed in just over
"In our view, that's (the aid request) not a sign of
strength, that's a sign of weakness," Muehlbronner added, noting
the Spanish government's growing dependence on its domestic
banks as buyers of sovereign debt.
"We do see an increasing risk of Spain needing to ask for
more support in the coming months or in the coming years," she
Moody's now puts Spain's rating one notch above junk status.
Standard & Poor's rates Spain two notches higher at BBB-plus
with a negative outlook. Fitch Ratings cut Spain's rating by
three notches on June 7 to BBB - one notch above Moody's - and
put a negative outlook on the credit.