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Bond downgrade puts pressure on Spain for bailout request (+video)

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.

Spain's latest downgrade was partly due, says Standard & Poor, to a lack of clear direction in eurozone policies. Joanne Nicholson, Reuters, reports.
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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.”

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