Even though Standard & Poor's dropped Spain's bond rating to just above junk status, making a bailout request likely, Germany remains opposed to acceding to a bailout prematurely.
Pressure mounted Thursday on Spain to officially request a European bailout after rating agency Standard & Poor’s downgraded the country’s rating to the lowest investment grade possible. But even if Madrid finally makes the long-expected request, it still faces one more obstacle: Germany, which doesn't believe Spain needs the bailout.
S&P downgraded late Wednesday Spain’s debt two notches to BBB-, just a notch above the non-investment rating of junk status. “The deepening economic recession is limiting the Spanish government's policy options,” S&P said in a press release.
“The negative outlook on the long-term rating reflects our view of the significant risks to Spain's economic growth and budgetary performance, and the lack of a clear direction” in the 17-member eurozone policy, the rating agency added.
“We were surprised,” said Spanish Secretary of State for Economic and Business Affairs Fernando Jimenez Latorre about the downgrade. He suggested though S&P was wrong. “The agency could reconsider once the goals we have set out are met.”